Chidambaram hints at interest rate cut, review of controversial tax rules

Finance minister P Chidambaram has indicated that an interest rate cut and re-view of some controversial tax measures may be in the offing. The measures include the General Anti Avoidance Rules. The minister also sought to set at rest investor fears in his first official statement in his new capacity.

As he unveiled a roadmap to revive stalled growth and restore investor confidence, he said it was necessary at times to take carefully calibrated risks aimed at stimulating investment and easing the burden on consumers. He said the government would take appropriate steps in this regard.

Chidambaram stressed that high interest rates inhibited the investor and were a burden on every class of borrowers, be they goods manufacturers or home buyers, or two-wheeler buyers or students who availed education loans.

His remarks, coming on the back of his meeting with Reserve Bank of India governor D Subbarao yesterday, triggered talks of an impending rate cut and eased bond yields.

In a bid to allay fears of foreign investors, the finance minister said, clarity in tax laws, a stable tax regime, a non-adversarial tax administration, a fair mechanism for dispute resolution, and an independent judiciary would provide great assurance to investors. 

According to analysts this was a clear indication that the government was preparing the ground to dilute the controversial GAAR and the retrospective amendment to the Income-Tax Act.