The Telegraph
Since 1st March, 1999
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Market balm, Left massage

New Delhi, July 21: Finance minister Palaniappan Chidambaram performed his first budget rollback today, watering down the tax on securities transactions and expressed the belief that he can sweet-talk the Left into dropping its objection to easier foreign investment rules.

Chidambaram repaired his market-friendly credentials by announcing in Parliament a graded transaction tax structure, slashing the 0.15 per cent rate to a tenth for day traders who had hit the warpath, and exempted mutual funds that are not equity-based and the bond market from the levy.

Expected as the relief was, the stock market staged a celebration, a minor one. The Bombay Stock Exchange share index rose 36 points to close at 4993.

While declaring the rollback, it seemed the grim prospect of another hung at the back of his mind. “This is a matter which could be resolved through discussions,” he said, addressing the Left in connection with the dispute over the proposed increase in the foreign investment limit in insurance from 26 to 49 per cent.

The Left is also opposing a similar measure for telecom and civil aviation.

Chidambaram took care to massage the Congress ally’s sentiments, saying, for instance, that the government would seek to promote and “reconstruct” that part of the public sector which has created wealth and made India stronger.

His statements on agriculture would also make the Left happy. “I want to assure this House that agriculture will remain the centre of focus this year, next year and the next.”

Voters in the recent elections had given a mandate for “another look” at economic reforms to spread the benefits to the less privileged, he said.

His speech was not all sugar and honey, however. Quoting his favourite Tamil poet, Thiruvalluvar, Chidambaram said: “I will talk to them (the Left) sweetly. I will listen to them. I will try to convince them. But eventually the king has to take decisions in the best interests of the country.”

The Left has threatened to vote against the amendment to law that is necessary to implement the proposal to raise the foreign investment limit in insurance. The government faces defeat because the BJP, too, has decided to oppose it.

Even CPM general secretary Harkishen Singh Surjeet, instrumental, along with Jyoti Basu, in getting the party to support a Congress-led government, has spoken out against Chidambaram’s announcement.

Writing in the latest issue of party mouthpiece People’s Democracy, Surjeet said: “The Left will see to it that these FDI (foreign direct investment) proposals are rolled back.”

In the House, Left members kept quiet — they had loudly protested while Chidambaram made the announcement in his budget presentation.

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