Mistry report may miss the bus

RUN-UP TO THE BUDGET

Many financial sector reforms suggested by the Percy Mistry Committee on making Mumbai an international financial centre may not figure in Budget 2008-09.

Finance ministry officials say the implementation of the recommendations of the report will be carried out only after the Budget.

KEY RECOMMENDATIONS

Full capital account convertibility by 2008-end

Eliminate securities transaction tax by 2007 and stamp duties by 2008

Open up purchase of rupee-denominated debt instruments issued by the government to all buyers

Focus monetary authority exclusively on single task of managing key short-term 'base rate' by 2009-10

Set up independent public debt management office by 2009

Shift financial regulatory regime from rules-based regulation to principles-based regulation by 2011

Permit unrestricted entry of well-known global accounting firms operating in IFCs/GFCs by 2008

Transfer all regulation/supervision of any type of organised financial trading to Sebi by 2008

The Mistry Committee has recommended full capital account convertibility by 2008-end, abolition of the securities transaction tax and stamp duties, pruning of public debt and doing away with restrictions on foreign investment in sovereign bonds.

It has also proposed imposition of goods and service tax on financial services, creation of a currency spot market and rupee-settled exchange traded currency derivatives market. The Reserve Bank of India (RBI) is currently working on a mechanism to develop a rupee futures market in the country.

As a part of the consensus building process on the recommendations, the finance ministry had sought comments on the Mistry report from various ministries like commerce and urban development, and financial-sector institutions like the Securities and Exchange Board of India (Sebi), Insurance Regulatory and Development Authority (IRDA) as well as the RBI.

Stakeholders like the RBI have favoured a cautious and gradual approach to financial sector reforms rather than a big-bang approach, as advocated by the Mistry Committee report.

In its detailed chapter-wise response on the Mistry report, submitted to the finance ministry, the central bank has expressed reservations over setting a deadline for undertaking financial sector reforms as suggested by the Committee.

The 15-member High Powered Expert Committee (HPEC) on making Mumbai an International Financial Centre was set up following an announcement in the Budget 2005-06.

The panel submitted its report to the finance ministry in April last year, though the chairman of the committee, Percy Mistry, resigned before the report's com-pletion.