Indian financial markets are among the most speculative and volatile in the world. To curb unproductive speculation and excessive volatility, the author proposes a Securities Transaction Tax (STT) of 0.25 per cent. The author argues that the wider economic and developmental gains of taxing speculative money in stock markets are more than the private gains of a handful of speculators, financiers and traders.

The paper provides legitimate grounds for imposing a STT on Indian financial markets. It underscores the point that the obstacles to put restrictions on speculative trading are…