Mukherjee allays US fears, says India good for investment

Washington -  Allaying a "misapprehension" about some retroactive changes in Indian tax laws, Finance Minister Pranab Mukherjee has assured corporate America that India was a good  investment destination with a clear and stable tax regime.

"There is some sense of despondency amongst a section of US businessmen, particularly because of their apprehension - and I would say misapprehension - about certain legislative  amendments which we have proposed," he said in Washington Friday.

"There is no uncertainty and the changes have been made to bring certainty to the tax law, that was the intention from the beginning," Mukherjee said in a talk at the Peterson Institute for  International Economics, a Washington think-tank.

The proposed changes to impose retroactive tax on some international mergers that exchange Indian assets announced in the budget couldn't be used to reopen tax cases more than six  years old as other legislation existed to prevent this, he said.

"Would the income tax cases be reopened from 1962? The answer is 'no,'" Mukherjee said. "No case can be reopened which is more than six years old."

The US business, he acknowledged had some doubts whether India's tax regime is stable or not. "My answer is it's clear, it's stable."

"There is no uncertainty," he said, adding that India would hold transparent, open discussions with those who have complaints about the law.

Secondly investment decisions are not taken on the basis of tax concessions alone, Mukherjee said. "They are based on what's the size of the market, whether the systems are transparent  and what's the purchasing power of people."

"From all these standpoints, India appears to be a good investment destination. There should not be any apprehension," he said.

In the midst of a political hoopla over a senior official's reported remark that major reforms were unlikely before 2014, Mukherjee also expressed confidence that three key amendments  relating to pension fund, insurance and banking would be legislated "if not in this session, by next session" of parliament.

He was also hopeful that a constitutional amendment to implement Goods and Services Tax (GST) would also be passed during the current or next session and implemented within this year  after ratification by at least 15 states.

Mukherjee said he also planned to reduce subsidies in all areas except on food with a two pronged strategy to prevent the leakage of subsidy and ensuring that it reaches the targeted  beneficiary directly through their bank accounts.

He also proposed a quantum ceiling of 2 percent of GDP with a target of 1.75 percent in the next three years. "I am confident it's possible to do so."