| Finance minister P. Chidambaram and World Bank country head Michael Carter at the release of a book on financial sector reforms in New Delhi on Monday. (PTI)
New Delhi, Sept. 12: The government has several financial sector reforms on its agenda but will introduce them only after discussions with its political allies.
“There is much to be done (on financial sector reforms) but one has to negotiate his way through the political system,” finance minister P. Chidambaram said at the release of a book on financial sector reforms. The book has been co-authored by several former finance secretaries.
The finance minister did not elaborate on the sectors he wanted to usher in reforms. But North Block officials said reform in insurance, pension and even bankingwould have to be cleared by the Congress allies first before they are brought before Parliament.
The Left is opposed to relaxing FDI norms in the banking and insurance sectors and the Congress-led alliance will have to negotiate with it before bringing in any legislation on these contentious issues.
Chidambaram added that he would be considering new reforms in the financial sector.
The minister said the government should find out why Indians prefer real estate and gold assets to financial instruments.
“Over 11 per cent of the 23.4 per cent saved by our households is put in property and bullion ... we need to look at what is discouraging them from saving in financial assets,” he said. The government needs to strengthen people's propensity to save in financial assets, he added. However, despite the high propensity to play safe and a low per capita income, India has a high financial asset base of $1.034 trillion, he said.
Officials said a mix of policy incentives to channelise more savings into the financial sector, especially into long-term funds like insurance and pension, were being considered and these might be unveiled in the next budget.
Current tax sops on the housing sector could, however, continue. “It’s middle-class centric and that being the most vocal section of the populace, governments are scared of touching concessions there,” officials added. Eventually these sops may well be rationalised they added.