| Chidambaram addressing businessmen
New Delhi, July 12: Finance minister P. Chidambaram today said the government will push ahead with reforms and will not back down on its proposal to raise foreign investment limits in insurance, telecom and aviation.
Speaking to businessmen, he presented a strong defence of the decision. But at a meeting of the ruling United Progressive Alliance, he said he was prepared to talk to the Left, which opposes the move.
Chidambaram appeared ready to revisit the tax on securities trading. “The transaction tax has received more criticism than it deserves,” he said. The minister added that he was prepared to rejig the rates for long-term and short-term capital gains taxes and the transaction tax “if someone could come up with a better set of numbers”.
The budget abolished the tax on long-term capital gains, cut the short-term levy to 10 per cent and introduced a 0.15 per cent transaction tax, drawing a violent reaction from the stock market. Talks between the minister and market representatives are scheduled tomorrow.
“No budget is infallible. And no finance minister is infallible. I’d be the first to admit this,” he said.
“These are just proposals… I am prepared to listen to anyone who has a justified case. As I said in Parliament: ‘Main hoon na (I’m here)’.”
He said the government would press ahead “with all the reform initiatives made over the last 12-13 years”.
The next budget will have more comprehensive tax reforms. “If there is better tax compliance, we could see some tax reforms this year itself,” he added. A task force is expected to submit recommendations for tax reforms in the next few days.
He reaffirmed that agriculture would be the focal point of his government’s economic programme. “We have a complex electoral mandate. As a finance minister, it is my responsibility to understand it, interpret it and act accordingly. If I don’t, I face rejection like the earlier government has,” he said.
Although the Left, which supports the government, has objected to the higher foreign investment ceilings, Chidambaram is ready to try and persuade them to accept it.
After a meeting of the ruling alliance, a spokesman said the minister would talk to all partners, including the Left.
In support of his decision, he said that in insurance, the limit had been raised from 26 to 49 per cent, which would not modify the ownership pattern. Nor would it affect government-owned companies like the Life Insurance and General Insurance Corporation.
After allowing 49 per cent foreign investment in airports, it makes little sense to keep the limit at 40 per cent in aviation, he said. The budget has raised it to 49 per cent and in telecom to 74 per cent.
He said that in telecom, 74 per cent foreign investment is already allowed but not in a transparent manner. “Currently, we allow 49 per cent in telecom companies. But with holding companies having another 25 per cent indirect stake, the 74 per cent limit already exists.”
“The telecom industry has a maze of lines which reminds one of the Hindu undivided family’s succession lines,” he said amid laughter.