Yesterday, Mumbai stock exchange's Sensitive Index saw a huge drop and after that The Communist Party of India (Marxist) or CPI(M) called on the Indian government to reintroduce capital gains tax. Sitaram Yechury an influential leader of CPI(M) said, ”"The fact that the rupee slid against the dollar yesterday following the pull out of funds by FIIs shows that the macroeconomic consequences of the bubble going bust can be severe." Today, Indian Finance Minister P Chidambaram has ruled out the idea of reintroducing capital gain tax on foreign institutional investors (FII).
“The foreign exchange reserves were at 163 billion dollars, inflation reined in below four per cent for several weeks, manufacturing sector is growing at over nine per cent and monsoon has set in, which is expected to be good,” said Mr. Chidambaram.
There have been some speculations that the Indian government might impose higher tax on foreign institutional investors (FII) and as a result, many FIIs sold their shares and that is why the big drop in the index took place. Mr. Chidambaram expressed his dismay about the 'uninformed reporting and editorialising'.
CPI(M) is the largest partner after Congress Party in the coalition government and Congress needs the support of CPI(M) to remain in power. So, it will be interesting to note that how Mr. Chidambaram can carry on his reformist agenda. However, I am not such worried because CPI(M) led Left Front Government on the state of West Bengal is now aggressively pushing market reforms to attract foreign investment.
Related Articles
Comment Preview