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Journalism of Courage
MUMBAI, July 20: A fresh round of sops for the IT sector pertaining to banking and financing needs, forex availability and external approvals is next on the agenda, indicated finance secretary, Montek Singh Ahluwalia. These would follow the recent tax sops announced for the sector.
The finance secretary added that the existing structure of having a separate Act for UTI and another one for other mutual funds seems to be working fine as UTI is subject to inspection from SEBI. Putting in place a common Act as recommended by two SEBI appointed committees could face legal difficulties and therefore could be considered in the future.
Speaking at a seminar on mutual funds, Ahluwalia said that the government has already taken bold steps for the development of the IT sector. "The tax sops have been announced. We are now working on similar such sops related banking, financing, forex availability and outside approvals for the sector", said Ahluwalia. The IT sector has called for easing out the process of taking overcompanies internationally by raising funds internationally and raise monies abroad to offer stock options.
On the mutual fund industry, Ahluwalia, said that mutual funds should concentrate on coming out with pension products of their own and not expect pension funds to hand over their assets to them for management. Once the sector is thrown up for competition, pension funds are going to compete with mutual funds and would therefore prefer to manage their own funds. The mutual fund industry has been harping on getting the government to get pension funds to invest in equity markets through mutual funds.
"When other players come and start offering better returns through investment in equity then funds like LIC will review their decision to invest holdings only in financial institutions", said Ahluwalia. Outlining the current state of the Indian economy, he said that the government would need to take steps to boost export performance especially in the wake of the south-east-Asian economic crisis. This regionaccounts for 20 per cent of India’s exports.
Apart from this, creation of high quality infrastructure holds the key to India’s growth revival, said Ahluwalia. Once these steps have been initiated and the country’s growth is once again on a high growth path, there would be a change in the investment mood of FIIs, he said.
Ahluwalia said that the current south-east Asian crisis does not appear to be a temporary one as was envisaged earlier. "When Thailand was the only country in the grip of the crisis we thought it would be a temporary phemonenon. But now that it has spread to Korea and now even to Japan, the crisis appears to be a deep seated one and it is not going to be easy to get out of this," he said.
This was one of the main reasons for the exit of FIIs, he added. On the mutual fund industry, Ahluwalia said that the share of bank deposits in mobilising household savings is going to diminish and move towards mutual funds.
While lauding UTI for holding on to its position of accounting for 80 percent of the total mobilisations, he said that competitive forces will ensure that UTI would not hold on to this dominant position for long.
