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Liberal policy approach revives hopes
With the return of P Chidambaram as Finance Minister, the environment seems to have turned conducive for those keen on investing in India.

Although there has been no word from the new minister on any policy initiatives after he assumed office, the two major decisions on allowing foreign direct investment (FDI) from Pakistan and corporate debt restructuring are being seen as Chidambaram’s initiative to revive investment climate in India.

Although the two important notifications were issued by the ministry of commerce and industry, sources told Deccan Herald that the decision on them had already been taken at the Prime Minister’s office level and Chidambaram played a significant role in that.
While allowing FDI from Pakistan is expected to help the two countries enhance the $2.6 billion bilateral trade two fold, a decision on CDR will allow free hand to banks owned by non-resident Indians in restructuring loans of companies without the fear of getting into a regulatory problems on account of sectoral FDI caps.

Under the existing provisions, downstream investment by an Indian company, owned and or controlled by non-residents, into another domestic company is subject to sectoral FDI caps.

Chidambaram, who is widely regarded as pro-market reformer and known for his liberal approach towards investors, is credited with opening up FDI and carrying out disinvestment during his first stint as the finance minister in 1997.

This time around, when the Indian economy has clocked its lowest growth rate in the past nine years and investor confidence is at an all time low, the new finance minister is once again expected to revive the two. Chidambaram is also credited for nearly completing the Direct Taxes Code (DTC) that seeks to have low rates of tax on the broadest possible tax base so that the burden on individual tax payers is low.

The General Anti-Avoidance Rules or GAAR that target tax evasion was also his brainchild and he is understood to have supported Prime Minister Manmohan Singh’s views on GAAR.