The concessions implied by the first two of these moves are obvious. The third needs closer examination. Stock options are virtually payments "in kind" to employees, with a double edge. These payments are income, even if they are incomes of a kind that are by definition "saved" and "invested" in a specific form, and have, therefore, been considered to be subject to income tax. By virtue of being savings invested in financial assets, they can appreciate in value over the years, and if that increase in value is encashed through a sale of the asset, the additional earnings are subject to capital gains taxation as per the rules prevailing at the time. It is no doubt true that ESOPs offered by companies are most often accompanied by regulations as to when the employee concerned can choose to sell them. And, in the interim the price of the stock can decline, so that the actual income derived by the individual may be lower than that on which he/she paid income tax in the first instance.
 
This is a risk any individual accepting stock options must take, since it is not the role of the government to encourage stock options as a mode of compensation. However, stock options play a crucial role from the point of view of the companies offering them and the stock market. For companies, they provide a means of offering high and even astronomical salaries, without damaging their cash flow situations; and for the markets, the practice ensures a growing number of participants, which over the years helps increase the volume of trading and extent of market capitalisation. By choosing to abjure treating stock options as a "perquisite" and exempting them from income tax the Finance Minister has, in effect, provided a concession to firms and the markets at the expense of the state exchequer.
 
That Yashwant Sinha is prone to sacrificing revenue to appease the stock markets has been demonstrated repeatedly. The most glaring instance was when he reined in the tax authorities from ensuring tax payments by a group of foreign institutional investors (FIIs) who were allegedly misusing the double taxation treaty between India and Mauritius. Responding to market rumours that a slide in the Sensex was generated by the notices served on these FIIs, the Minister stepped in to allay "market fears" that these FIIs would be scrutinised and made to pay the sums demanded, if necessary.
 
Keeping the Sensex buoyant is obviously more crucial to Yashwant Sinha than enforcing the laws of the land and trying to reverse the post-liberalisation decline in the tax-GDP ratio at the Centre. Besides these, the Finance Minister has provided a number of less obvious concessions, such as a higher weighted deduction (of 150 as opposed to 125 per cent) for Research and Development (R&D) expenses incurred in knowledge-based industries. Experience shows that such concessions are exploited by passing them off as R&D expenditure outlays on activities that would not meet any acceptable definition of research. This transforms into a concession a measure introduced as a means of promotion.

Add to this the fact that every possible existing or new firm is adding on a 'tech', a 'dot' or a 'com' to its name in order to be identified as belonging to the knowledge-based sectors, and that such firms were the ones driving the speculative stock boom, which now appears headed for collapse, these concessions too are at one remove aimed at propping up the financial markets and providing incentives to finance capital. And with these manoeuvres coming in the wake of a steep slide in the Sensex, they are widely seen as having been formulated to cool market nerves.