In a pre-budget memorandum, the chamber said it is time that the Indian capital market should play its designated crucial role of raising funds for new investments. In this context "venture capital would contribute immensely to the development of creative entrepreneurs in the capital market." This would help in availability of funds not only for large industries but also to medium and small sectors.

The government should also consider giving tax exemptions for mutual funds to promote venture capital, the CII said.

The chamber's note said that the government should reconsider the withdrawal of indexation while computing capital gains on sale of debt instrument as it would have a negative impact on the growth of the debt market and act as a deterrent togrowth in the long-term domestic savings.

The CII pre-budget memorandum has said that stamp duty in case of transfer of shares should be made uniform across the country. Presently, stamp duty being a state subject, shows variation from one state to the other.

The confederation suggests that the popularity of instruments like deep discount bonds could be boosted immensely by amending the Income Tax Act so that a cumulative return received on debt instrument having a maturity period of say over 15 years or more, would be treated as capital gains.

Exemption under Section 47 (VIIA) of the Income Tax Act may be extended to foreign currency non-convertible bonds and other pure debt instruments approved by the government. It also suggested that a clause may be added in Section 5 of the Gift Tax Act to exempt gifts of foreign currency non-convertible bonds and pure debt instruments.

Given the subdued state of the money market, the chamber emphasised on the need to develop the concept of having foreignstrategic partner for equity mobilisation. Plants about 7-10 year old have their assets valued at a very low rate in comparison to the capital cost required by the new projects. As a result, they are not able to get the right price for their equity through the traditional route.

The CII recommends that the organisations like the credit rating companies need to assess the value of the business and the right value of the equity. This would help companies to assess their potential for the global market as well as the domestic market, which in turn would also give better opportunity for unlisted companies to obtain a strategic partner.

According to the confederation, there is a vast potential for the foreign currency preferential shares. However, the protection of the investment from the foreign currency fluctuation acts as a bottleneck. Method should be evolved to protect against foreign currency fluctuations so that substantial funds could be mobilised through foreign currency preferential shares.

If thegovernment does not want to allow the outflow of the foreign currency fluctuations of the equity, a system could be suggested to capitalise the amount into the company in the form of equity share on the mutually agreed price at the time of redemption of the principal price of the preference shares.

In the case of gestation period of core sector projects, the life of plant and machinery is much higher than the current assumption of 10-15 years, thus rendering the assumption of the terminal value of only five per cent as conservative. This should be flexible according to the nature of the project as the basis of the price earning ratio (P/E) is not the only factor relevant for the core sector projects as well as for companies that are implementing large projects with long gestation period, the chamber note said.

The pre-budget memorandum points out that for revitalising the capital market, it is imperative to develop various other factors other than earnings per share (EPS) and price earning (P/E) in thelife of the domestic capital market. The chamber said that financial information about the listed companies should be made more transparent, reliable and made available more frequently. This would improve the average P/E and automatically provide more opportunities for global equity fund mobilisation.

Other short and medium term instruments like non-voting shares should also be made available to the market and be made easily accessible to the rural public, it urges the government and the corporate sector.