No promise of fast reforms despite despondency

Mukherjee said he was not worried about the dip in foreign institutional investment.

Finance Minister Pranab Mukherjee today admitted there was a sense of despondency that things were not moving,but did not give any assurance that key financial sector reforms stuck in the legislative process will see the light of the day in this session. Neither did he hold out any promise that inter-ministerial differences that were delaying administrative decisions such as FDI in retail will be resolved anytime soon.

I want to take this opportunity to convey that these are aberrations,whereas the impression seems to be that this is the norm, Mukherjee told media persons over an hour-long interaction the third such in the last two days,with more lined up in the coming days. While he brushed aside concerns on policy paralysis,he noted that main worry was on the economy front. Here too,but for high inflation that is bordering on double-digits,he noted India was one of the fastest growing economies in the context of the overall global situation.

Mukherjee said he was not worried about the dip in foreign institutional investment. He was also not worried about Indian companies gradual shifting their investments abroad. FIIs are a symbol of volatility. One cannot be certain where it will come from and where it will go, he said. And as far as big corporates making investments in foreign countries because of policy unpredictability at home,the minister deflected the argument stating that this move only showed that companies are in a position to compete globally.

The finance minister,nevertheless,acknowledged that even US Treasury Secretary Tim Geithner and Secretary of State Hillary Clinton had expressed their concerns on the urgent need for the next wave of reforms in their meeting with him in Washington DC and New Delhi,respectively.

Reforms in the debt market will help foreign investors make investment in the infrastructure sector, he said. Further,delays in law-making,for instance,the land acquisition Bill,should not mean the government is not pursuing it. A lot depends on local conditions. If there is agitation on land,however logical the proposed law may be,it will take time, he pointed out.

When asked about India reneging on some of its commitments made to foreign investors,for example,on the Cairn-Vedanta deal or Vedantas Niyamgiri project,Mukherjee said,Sometimes,these become compulsions if the judiciary gives instructions or there is a public opinion. At times,there is strong pressure,maybe wrongly,and we cannot ignore it. The minister,in fact,said that even the United States has reneged on commitments in supreme national interest. But he hinted that the RIL-BP deal may sail through soon.

On the legislative front,he said financial sector bills such as those on banking,insurance to hike FDI limit to 49 per cent from 26 per cent and pension were still with the standing committee on finance. I dont know how many will be taken up in the monsoon session, he said. The monsoon session begins August 1 and ends on September 8.

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FDI in multi-brand retail that does not require any legislation is also mired in inter-ministerial wrangles. There are different views. It is still being discussed, Mukherjee said. On the more controversial demand that black money stashed abroad be brought back,the finance minister said the problem can be addressed only when his ministry gets current information from the foreign tax jurisdiction. While the houses of Parliament in Switzerland has ratified the amended Double Taxation Avoidance Agreement with India,it is yet to be vetted by its 26 individual cantons.

Hopefully,this will be done by August and we will start getting tax information from Swiss authorities starting September, Mukherjee said.