Sweeping tax reforms in Budget 2005: Manmohan

PM sells reforms at home, Chidambaram talks to global investors.

Prime Minister Manmohan Singh today came to India's financial capital, saw and conquered. Singh promised that the next Budget would contain the blueprint for a new tax system, which would be simpler and devoid of uncertainties.

He said the government would ensure that the capital markets too worked in an orderly manner. He made a pitch for job reservations in the private sector for the backward classes, urging voluntary action by companies on this front.

But he clarified that no national policy on job reservations was in the offing, adding that he had asked Agriculture Minister Sharad Pawar to hold discussions with companies on the issue.

He also reiterated that the country had the potential to attract foreign direct investment (FDI) of over $150 billion over a decade, that the government had an "open mind" on opening FDI in the print media, and that foreign direct and portfolio investment were welcome in the banking sector.

Captains of Indian industry and the stock markets responded enthusiastically to Singh, after his address at Mumbai's Taj Mahal Hotel.

Said Harsh Goenka, chairman, RPG Enterprises: "Unlike what most politicians do when elections are round the corner, he made no promises. He assured the business community of stability. He infused confidence among those who attended the meeting. I think all of us took him at face value."

Added Deena Mehta, managing director of Asit C Mehta Securities: "The meeting was good and the prime minister assured us the regulators would play a more proactive role in the development of the markets."

Anand Rathi, chairman, Anand Rathi Securities, echoed the point, "The prime minister was very positive and assured that all the necessary steps would be taken for the growth of the economy."

On his maiden visit to Mumbai after becoming prime minister, Singh told industrialists and marketmen: "Our tax system is riddled with too many uncertainties and gives rise to expectations that lead to harassment, delays and more uncertainties. We have a number of constructive (tax reform) proposals before the government. In the next Budget, we will come out with a blueprint of a tax system which is forward looking, rewards creativity, enterprise, savings and investments and, at the same time, is also equitable."

Singh said, "Widening and deepening of tax rates, increased compliance plus reduced harassment, reduced uncertainties about the tax system, all this will be spelt out in the next Budget."

Listening to him raptly were, among others, Deena Mehta, Harsh Goenka, Uday Kotak, the chairman of Kotak Investment and vice-chairman and managing director of Kotak Bank, Thomas Cook (India) Managing Director Ashwini Kakkar, the chairman of Zee and Essel groups, Subhas Chandra, Raymond Managing Director Gautam Singhania, Essar group Vice-Chairman Ravi Ruia, Tata Sons Executive Director R Gopalakrishnan, Bharat Forge Chairman Baba Kalyani, and Nikhil Meswani, director (marketing), Reliance Industries.

Singh promised that the government would ensure that "the regulator will be fair and work for the development of the markets".

Describing soaring prices as a temporary setback, he said the government was devising a mechanism to moderate the pace of inflation. He attributed rising prices to a "fear of poor crop, the delayed monsoon and a steep rise in oil prices".

Responding to a question on the apparent duality in governance, Singh said: "I am firmly in the saddle and in India there is only one prime minister. There is no dual power running the country. I am the prime minister but Sonia (Gandhi) is a source of inspiration to the United Progressive Alliance (UPA) government."