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India sees no firm deal on bank levy in Busan

India sees no firm deal on bank levy in Busan
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First Published: Fri, Jun 04 2010. 11 26 AM IST
Updated: Fri, Jun 04 2010. 11 26 AM IST
Busan: Finance ministers from the world’s 20 leading nations are unlikely to reach firm agreement on a controversial bank levy when they meet Friday, finance minister Pranab Mukherjee said.
The issue may be pushed back to a G20 summit in Seoul in November, Mukherjee told AFP in an interview.
The evy is backed by the United States and Europe but opposed by developing nations plus Canada and Australia, who say their banks did not trigger the 2008-9 crisis and should not have to pay for cleaning up the mess.
Mukherjee made the same point.
“Our banking system could withstand the trouble which counterparts in Europe and America had to face, mainly because of well-placed regulations,” he said.
“Well-placed regulations can achieve the job which the new proposal is to achieve through taxation. We are not in favour of taxing the banks.”
Mukherjee said ministers meeting Friday and Saturday in the South Korean city of Busan may “arrive at some sort of common formulation” on the issue, but decisions would be taken by their leaders.
The Busan meeting is preparing for a Toronto G20 summit on 26-27 June but the Mukherjee said the levy issue may have to wait till later this year.
“Perhaps the leaders would like to take more time to ponder over the issues before the Seoul summit,” he said.
Ministers are attempting to shore up a fragile world recovery against the threat posed by the eurozone debt crisis.
“We shall have to achieve economic recovery,” Mukherjee said. “At the same time we cannot give up fiscal prudence, so striking a balance between two apparently contradictory situations is to be achieved.”
Echoing host South Korea, he said the grouping needs “to emphasise development so that strong balanced growth all over the world can take place”.
The minister said he expects and hopes that Europe can contain the eurozone damage with a support package for financially distressed countries such as Greece worth €750 billion.
At the current level the eurozone crisis would have little impact on India but Europe was an important export destination and source of foreign investment.
“If Europe as a whole is affected by the crisis and their recovery is thrown down, then it would have an adverse impact,” Mukherjee said, reflecting widespread fears among Asian exporter nations.
India on Monday reported 7.4% growth in the year ended March and Mukherjee at the time forecast 8.5% GDP growth in the fiscal year to March 2011.
On Friday he said he hopes for an even higher figure and noted that the International Monetary Fund forecasts 8.8%.
But the minister said securing investment in infrastructure is a major challenge. He estimated the country would need $500-600 billion in investment in the next few years, without giving a precise timeframe.
Mukherjee said inflation was another important challenge, with food inflation reaching almost 21% in November before starting to fall.
He expressed hope of bringing core inflation below five percent in the next year.
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First Published: Fri, Jun 04 2010. 11 26 AM IST
More Topics: Finance | Economy | G-20 | Banking | Taxation |