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Probe RBI chief's faux pas, says Amar

Our Political Bureau  |  New Delhi 

Amar Singh, Samajwadi Party general secretary, today demanded a probe into Reserve Bank of India Governor Y V Reddy's remarks indicating that the government was considering the imposition of a tax on foreign institutional investment that, he believes, led to a sharp fall in share prices on January 12, 2005.
"Had any corporate head behaved like this there would have been a high-level inquiry as stock exchanges plummeted after Reddy's statement and Finance Minister P Chidambaram himself had to intervene to salvage the situation," said Singh.
Chidambaram had to undertake damage control and dispel any notions that such a move was being contemplated.
Alleging that Reddy had behaved "irresponsibly", the SP leader said he had written to the RBI governor, the finance minister and chairman of the parliamentary standing committee (Finance) BC Khanduri on January 14, just two days after the fall in the stock market. Singh, who is also a member of the House panel, said there had been no response so far.
"They have failed to even acknowledge receipt of my letter, leave alone responding to it or taking any action," he alleged.
"The RBI governor almost made the already falling stock market to crash by suggesting irresponsibly that FIIs be taxed," he said.
"This shows total lack of inter-departmental coordination and is a classic example of the right hand not knowing what the left is doing," he said quoting his letter to Khanduri.
Government sources, however, feel that the issue was being blown out of proportion. "The RBI governor had only talked about regulating the foreign institutional investment and not specifically about a tax. In any case, the finance minister and the RBI governor have already issued a clarification in this regard, its been nearly a month since this happened," said an official.
Singh said he was raising the matter to bring about greater accountability in the government.
"These are really double standards," he said.

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First Published: Wed, February 09 2005. 00:00 IST