The Hindu Business Line : 75% FDI in banks? Not in this Budget

IT is no accident that issues such as FDI limits in banking and construction are coming onto our radar so soon after the abolition of quotas for garments and textiles on January 1 this year.

They have been on our Government's radar all along; ever since the issue of liberalisation of garment/textile exports by developing countries (particularly China and India) to the US and the EU (via the GATT/WTO Agreement on Textiles and Clothing) got linked, more than a decade ago, to the hike in the import of services into developing countries (particularly in the field of banking, insurance, and construction; via the GATT/WTO Agreement on Trade in Services).

That said, however, it is not necessary for bankers to sit `two days before the Budget' nibbling their fingernails and `hoping for a moderate FDI limit' for the banking sector.

Were Mr Chidambaram of a mind to do it, he would, like the hike for construction, have acted on it before the Budget instead of in it. This, after all, was the whole point behind hiking the limit for FDI in construction two days before the Budget. No such `side-issues' are to be allowed to detract from discussions of the Budget, which will now be free to highlight primarily welfare (i.e. expenditure) rather than `tax'- (to be more precise, subsidy-) related issues, without any fear of sniper-fire from the wings.

So will FDI limits in banking, insurance and construction figure in the Chinese Budget this year? Unlikely. They dealt with these problems (or opportunities) years ago. And does it mean that banks, and insurance companies, can forget about their fingernails till the next Budget. Of course not. As and when the hikes take place, they will be off the Budget. That they will take place is, however, certain.

We hardly have a choice. We will, in the end, have to choose what we should, like China, have chosen in the beginning.

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75% FDI in banks? Not in this Budget

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