Why did the RBI governor want a ceiling and tax on FII inflows?
It happened again this week. Speaking at the release of the India Development Report of Indira Gandhi Institute of Development Research, Y V Reddy, the RBI governor had a few strong words about the quality and quantity of FII inflows. He suggested that it was time to consider ceilings and a tax on FII inflows. All hell broke loose in the investor community for the next couple of hours till Chidambaram came on air to clarify that there was no proposal to cap or tax FII inflows. He added that he had spoken to Reddy and Reddy has been misunderstood. Close on the heels of Chidambaram’s statement, Reddy, in a hurriedly called press conference clarified that the effectiveness of these measures could be arguable and hence undesirable. The next day, Bajpai made a statement saying that the final authority on taxing FII inflows was the finace minister. Bajpai is absolutely right but don’t we see a sense of disconnect between the SEBI, the RBI and the finance ministry? The RBI governor is suppose
