Economy Oct 6, 2012
Mumbai: Promising more reforms, Finance Minister P Chidambaram today expressed confidence that the bills on FDI in insurance and pension will be passed in Parliament for which he will soon open dialogue with the opposition parties including the BJP.
"There is a difference of opinion (on the issue of 49 percent FDI in insurance). I intend to meet with the leaders of opposition and convince them. I can convince the opposition parties that this clause (of raising the FDI cap) can be kept," he told a press conference on his first visit to the financial capital after taking over as finance minister.
The minister said that he was convinced that the two amendment bills crucial for the economy bills will be passed by Parliament and sought media's cooperation in this regard.
Asked by a reporter as to whether there would be more reforms after the second instalment that was announced during the week, he said, "I don't know why you are saying this is second instalment. There will be more. There will be more issues to be addressed. There will be more."
Earlier in the day, Chidambaram met RBI Governor D Subbarao and other top functionaries of the central bank, members of the Sebi board and representatives of mutual funds and financial institutions.
On the Insurance Bill amendment cleared by cabinet, he said, the government had accepted a vast majority of recommendations of the Standing Committee on Finance which, however, suggested that the FDI cap be retained at 26 percent.
After consulting Insurance Regulatory and Development Authority (IRDA) and market players, the government has come to the conclusion to raise it to 49 per cent.
"So there is a difference of opinion on that. I would have to do my best to convince the principal opposition party as well as the other opposition parties that it is in the best interest of the insurance industry and the people of the country that we must raise the FDI cap from 26 to 49 percent.
"I intend to do just that. I intend to meet the leaders of the opposition and convince them. I am confident that I can", he said.
The minister said if the cap is kept at 26 percent, no extra capital will flow into the country. The entire additional capital will have to be funded by Indian partners who have said that they don't have that kind of capital.
"The only way additional capital will come is if you raise the cap to 49 percent so that foreign partner can bring in more capital," he said.
Chidambaram said all insurance companies have supported the IRDA proposal for raising the cap to 49 per cent.
Chidambaram said that government was committed to promoting investment, channelising savings, helping entrepreneurs raise funds to implement projects.
"More investment into key areas like infrastructure and production of vital goods like steel, automobiles, software is necessary. It can be done if we have confidence in ourselves."
He said that industry has conveyed to the government that economic situation was challenging and certain fundamental concerns apart from regulatory issues need to be addressed.
"We will talk to regulators and we will try to resolve regulatory issues," Chidambaram said.
As far as economic situation was concern, he said, the industry was supportive of measures taken so far, they wanted more measures to address fundamental concerns of the economy.
"We expect that we will get back to the high growth path", he said.
On inflation, he said, while headline has been brought down from 10 to 7.5 percent because of steps taken by the government, there would be some short-term impact on the prices because of measures like diesel price hike.
"Some steps that we have taken will indeed cause in the immediate time frame a small rise in inflation. But in the period say 6-8 weeks inflation will come down", he said.
As regards the Parthasarthi Shome panel report, he said, the government would make up its mind on retrospective amendments after receiving feedback on the report which would be made public shortly.
"We would like a resolution of pending disputes as well as anticipated disputes", he said, while replying to question on Vodafone tax dispute case.
On the Rs 30,000 crore disinvestment target for the current fiscal, Chidambaram said, "I am confident of achieving the target."
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