“No, to be honest, I don’t think it was an intent to or we didn’t aim to touch the FPIs,” she said about the surcharge levied on those earning over Rs 2 crore. Sitharaman promised to hear out investors that will need to convert themselves into companies from a trust structure to avoid the surcharge. “If this issue of conversion is becoming tedious, conversion is not tax-neutral, I am quite willing to hear them out.”
But she sounded a note of caution about privileging overseas investors.
“Once you start rethinking, it becomes a dialogue of what is the level of rethink. Are you looking at, you know, yielding only to the FPIs? Then what happens to the domestic investors?” she said. “So, I will leave it at that for now.”
The government increased the surcharge to 25% from 15% on those with taxable income of ?2-5 crore and to 37% from 15% for income above Rs 5 crore. This increased surcharge on individuals, Hindu Undivided Families, trusts and association of persons — which impacts foreign portfolio investors, sovereign wealth funds and alternate investment funds — has been cited as one of the key dampeners of market sentiment. About 40% of FPIs are liable to the surcharge. The Sensex has declined over 4% since the July 5 budget.
Sitharaman said she was not worried about the reduction in growth estimates, adding that the slowdown was global and India was still expected to grow at 7% or more. “I wouldn’t say (I’m) worried. Of course, I will be closely watching the developments and making sure that timely responses are made from the government side — not knee-jerk, but considered,” she said.
The International Monetary Fund (IMF) last week cut India’s growth forecast for FY20 to 7% from 7.3% estimated earlier.
‘Not Doing Any Review’
She said there was room for a further reduction in interest rates.
“I’ll honestly wish rate cut… and yes a significant rate cut, would do a lot of good for the country,” she said. “We will now have to look at that route with a lot more hope. And, the industry also feels that there is space for it.”
She dismissed reports about a review of the budget proposal for overseas sovereign borrowings but added that details have not been firmed up. She was responding to a question about whether the Prime Minister’s Office had suggested any reconsideration following reports that the RSS and the Swadeshi Jagran Manch have opposed the idea.
“I am not doing any review. I have not been asked by anyone to do a review,” she said. The tax targets set out in the budget can be met. “First of all, target that we have set, this I even said during the income tax day event, is not at all unachievable,” she said. “It is certainly something that the tax department themselves have agreed that it is not a demanding, unrealistic target.”