PM rules out imposition of Tobin tax on capital inflows

Prime Minister Manmohan Singh, on Tuesday, ruled out the imposition of Tobin tax on capital inflows in the country, saying the situation in India has not not reached a problem stage.

Prime Minister Manmohan Singh, on Tuesday, today ruled out the imposition of Tobin tax on capital inflows in the country, saying the situation in India has not not reached a problem stage.

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"Well the Tobin tax has merit in particular situations but as far as India is concerned we have not reached a stage where capital flows have become a problem. I think if capital inflows into our country both by way of direct investment and by way of portfolio investment have been at reasonable levels, we don't face situations of the kind which would require an imposition of Tobin tax," he said in reply to a question on his views on the tax.

There has been a talk among economists on a Tobin-like tax--a levy on all spot conversions of one currency into another--to prevent fluctuations in the market due to excessive capital inflows into the country. Foreign Institutional investors have been pumping in money into the Indian stock markets, adding to the capital inflows into the country. The inflows up to June this year were a little over Rs 31,000 crore. Since the country is battling double digit inflation, there is a feeling in certain quarters that funds coming from overseas are adding to the pressure.

He also said that the government was not into contemplating a legislation in the area of corporate social responsibility. "There is now a lot of discussion on corporate governance. I think good corporate houses are looking at what they can do in non-traditional areas of providing social services, education, health facilities for their employees. "I think that it is a corporate responsibility, which has to be shouldered by the corporate sector on its own. We are not contemplating any legislation in that area," the Prime Minister said.