Opinion The whistling reforms
Volatile markets have already kept the finance ministry away from selling stake in a single PSU in the last six months.
Fridays announcement by finance minister P Chidambaram lowering of the withholding tax on interest on overseas borrowings and launching of the Rajiv Gandhi Equity Savings Scheme are expected to further soothe the nerves of wary investors.
Though in the offing for over six months (as they were proposed in the Budget 2012-13),the measures are in sync with the blitzkrieg of economic reforms unveiled by the UPA over the last one week to revive investor confidence.
In fact,the late evening notifications on Thursday permitting foreign direct investment in multi-brand retail and hiking the FDI cap for aviation,were promptly followed by Chidambarams Friday morning press conference where he announced these two initiatives.
The reduced tax on interest on overseas borrowings from 20 per cent to 5 per cent will lower the cost of such funds for domestic companies,while the RGESS is expected to solve three pressing problems promote an equity culture which would help boost the domestic bourses,discourage investments in gold and also revive the fortunes of the mutual fund industry,which have now been included in the scheme along with exchange traded funds.
Over the next few weeks,the government is likely to follow through with more investor friendly steps take Cabinet approval for hiking FDI in insurance and allowing foreign investment in the pension sector; and also take up the Vijay Kelkar committee report on fiscal consolidation.
But perhaps the governments toughest task in the near future will be going ahead with its disinvestment programme that is essential for keeping the deficit in check. Volatile markets have already kept the finance ministry away from selling stake in a single PSU in the last six months.
Markets have cheered the recent slew of announcements with the Bombay Stock Exchange Sensex closed at a one year high on Friday; but its anyones guess whether investors will retain the same confidence in the government over the next few months to participate in PSU divestment.
As a senior government official pointed out,Seeti par seeti lag rahi hai,par daal galti hi nahin hai (We have been trying every thing to cook the lentils,but its still far from getting cooked.)
surabhi.prasad@expressindia.com
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