No Tobin tax because no need for it, he says
Prime Minister Manmohan Singh on Tuesday ruled out the Tobin-type tax on capital flows, saying that while the Tobin tax has merit in particular situations, capital flows were not a problem for India, either in the case of portfolio investment or foreign direct investment (FDI). The flows were at “reasonable levels,” he said. “We don't face situations of the kind that would require the imposition of Tobin tax”.
Reserve Bank Governor Duvvuri Subbarao has said on a few occasions in the recent past that the Tobin tax was not “off the table.” Tobin tax is a levy on capital flows from abroad designed to discourage sudden and large destabilising outflows. Some Latin Americans have imposed it. It is usually about 2 per cent.
The Prime Minister said the next step in the deregulation of petroleum prices was to free up diesel pricing. These were “much needed reforms.”
He said petroleum subsidies had reached financially unsustainable levels. “The people are wise enough to understand that excessive populism should not be allowed to derail the progress our country is making.”
On June 25, the government freed petrol pricing so that the oil marketing companies can charge what they like, instead of charging what the government tells them to do, thus driving up their losses and increasing government subsidies.
Appearing cool and relaxed after a gruelling series of meetings over a day-and-half at the G-20 Summit, Dr. Singh answered a range of questions from the need for macroeconomic coordination to the Sikh diaspora in Canada, Bhopal, and the future of the G-20.
On the last, he said, the Toronto G-20 meeting was more in the nature of preparation for the Seoul Summit in November. While each country would have to decide on how to manage the exit from its stimulus, it would also have to keep in view the fact that in an inter-dependent world, sovereignty had to be viewed from that perspective. There was no one-size-fits-all in managing fiscal consolidation. It would have to be done in a growth friendly fashion. Countries that wanted immediate fiscal consolidation have come round to this view, he said. In that sense the Toronto summit was useful.
He said the BRIC countries would have to consult each other more.
Asked about the G-8, he said Prime Minister Stephen Harper of Canada told him that henceforth the G-8 would focus more on its security issues. Economic issues would be the staple for the G-20.
Referring to his meeting with United States President Barack Obama, he said they mostly focused on the agenda for Mr. Obama's visit in November. The U.S. National Security Advisor would come in July to discuss the agenda for the Obama visit with Shiv Shankar Menon, his Indian counterpart.
The Warren Anderson matter was not discussed, said the Prime Minister. “We will cross that bridge when we come to it.” India would continue its efforts to extradite him. But India had not approached them yet.
Asked how Mr. Anderson was allowed to leave the country, he said there were no records to show that the then government knew about it. This was the only time he became slightly irritated. “We are not hiding anything,” he said.
He also said that delays in the judicial system were a major problem.