The deadline for capital account convertibility could be pushed by another 10 years, going by the views of the Reserve Bank of India (RBI). This is way-off the schedule suggested by the Tarapore Committee on fuller capital account convertibility and far beyond the end-December 2008 deadline suggested by the Percy Mistry report to make Mumbai an international financial centre (IFC). The RBI, in its feedback on the Mumbai IFC report, has suggested a more cautious timetable. The feedback is part of the wider consultation process initiated by the finmin to develop a plan to make Mumbai an IFC. While the apex bank agrees with the report, it feels that full capital account convertibility would need a more gradual approach. A year's time may be hurrying the country's pace of reforms, RBI suggested. Among the ministries that have given their suggestions, commerce & industry has agreed to carry out the Percy Mistry report's recommendations in its totality. The ministry of urban development has also shown interest and is willing to carry out Mumbai's urban revamp under JNNURM. However, it is the revenue department that has said it will carefully consider the tax related proposals at the time of the Budget. The Tarapore Committee, in its 2006 report, proposed a three-phased approach to make the rupee fully convertible, with the first phase beginning in 2006-07, the second in 2007-09 and ending in 2011. Full capital account convertibility is expected to be one of the main tools in making Mumbai an IFC. The Percy Mistry report has suggested other financial reforms too that include cutting government equity and exiting from all financial institutions by 2015. Also, it suggested the promulgation of a unified Financial Services Modernisation Act, which would cover all aspects of financial services. The report has asked for the abolition of the securities transaction tax and stamp duties.
Rupee Problem
• Tarapore Committee recommended three-phased approach ending 2011
• Percy Mistry panel suggested more aggressive deadline of Dec 2008
• Capital account convertibility one main tool in making Mumbai an IFC
• RBI says convertibility in a year may be hurrying pace of reforms.
CAclubindia
