Gandhinagar : Reserve Bank of India Governor Urjit Patel batted for a single regulator for international financial services centres (IFSCs) such as the Gujarat International Finance Tec-City.
“While individual regulators can supervise the entities initially when the size of the business is small, a unified regulator would be necessary to pay undivided attention to the IFSC. Work on the design of such a framework should begin soon so as to be able to implement this in time,” he said in a speech at the Vibrant Gujarat Global Summit 2017, reports Cogencis.
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“GST Implementation before Sept 16 is a necessity”
Finance Minister Arun Jaitley reiterated that the Centre is still aiming to roll out the Goods and Services Tax (GST) regime from April 1 if all pending issues are sorted out. GST, which is to subsume most of central and state taxes like excise, service tax and VAT, needs to roll out by latest September 16, 2017, he said. Under the Constitutional Amendment passed by Parliament for the GST implementation, some of the existing levies would expire after September 16. Jaitley said the government was aiming to implement the new sales tax from April this year. “We would want it to be implemented from April if all issues are resolved. But implementing before September 16 is a necessity,” he said.
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One of the key impediments in the early stages of the financial hub was ensuring that regulators were on the same page in passing laws that would be in harmony and attract institutions to launch operations in the international finance centre.
Patel also cautioned against the financial hub depending on fiscal incentives or other leeway for growth, and called on the financial services centre to work on various aspects such as dispute resolution and legal framework. “An IFSC should have a legal structure that is sufficiently supportive of the swift resolution of conflicts and disputes arising from the settlement/enforcement of complex international financial contracts,” he said.
“The contract should be of international standard and enforceable in the court of law and preferably similar to ISDA (International Swaps and Derivatives Association) documentation.” The RBI governor called for “a modern complementary legal infrastructure” within Gujarat International Finance Tec-City, by strengthening the existing legal framework for entities operating in the financial hub, vis-a-vis laws governing the domestic sector. He said that it was possible that many business entities waiting for such a framework would fall into place before moving to Gujarat International Finance Tec-City. Patel also sought a review of laws governing financial contracts in India to plug gaps so that Gujarat International Finance Tec-City could have a world-class legal framework. For this, he said that existing laws for financial contracts could be amended, or a fresh law passed.
The RBI governor proposed the constitution of a high-level working group to address these gaps in “mission mode”. Commenting on India’s GDP, Patel said India must take note of the views that share of government debt to GDP is coming in the way of credit rating upgrade. “Specifically, this will help us to better manage risks for ourselves, and thereby mitigate financial volatility,” he said. Patel said since 2013, the government has successfully embarked on a fiscal consolidation path. Even then India’s fiscal deficit, comprising both state and Centre, is the highest among G-20 countries, according to International Monetary Fund data.
S&P Global Ratings had in November affirmed India’s long-term sovereign rating at BBB- with stable outlook. It said there could be upward pressure on the rating if the reforms lead to improvement in fiscal outcomes, leading to net general government debt falling below 60 per cent of GDP.
Patel also said higher borrowing by governments and pre-empting resources from future generations cannot be a short cut to long-lasting higher growth.”Instead, structural reforms and reorienting government expenditure towards public infrastructure are key for durable gains on the Indian growth front,” he said.
