Analjit Singh, non-executive chairman of Vodafone India – the company which is at the centre of the retrospective tax amendment controversy -- today welcomed the finance minister’s assurance of a review of the issue and said “much of India’s problems are man-made’.
Terming the appointment of P Chidambaram as finance minister as “perhaps the best thing that could have happened because of his domain knowledge”, Singh, who is also chairman of Max India, said the most unfortunate, man-made and avoidable problems such as retrospective legislation, GAAR and P-notes is frightening FIIs.”
According to him, the problem arising out of retrospective tax was created by a few people and wasn’t a systemic failure. “What is encouraging is that the system is still strong enough to take care of problems created by a few people. So net-net, I'm optimistic,” Singh said.
Speaking on the sidelines of the CII Insurance Summit, Singh said that if you punish someone too hard, they became risk and action-averse. “If you get fever, it is a symptom but not the root cause. But people do get scared of fever. Similarly, market is down, rupee is all over the place, inflows are limited, FIIs disappear, new overseas players are not coming in – all these are symptoms. However, people get scared of all this leading to a cascading effect downwards.”
He gave the example of South Africa where four mobile operators, which were reducing rates, were told by the regulator that they would be fined $10 million each. At the same time, the companies were given the option of increasing rates, the logic being that if there was top line growth, the government would make more money through personal taxation, indirect tax etc.
Singh said that there were several positives as well which included reduction in the skilling problems, better focus of infrastructure and a large number of people getting added to the workforce. As far as skilling goes, exponential efforts were being made by both government and private sector in all forms of life. All these factors give a positive outlook for the economy.