CNBC-TV18's Shereen Bhan caught up Damodaran to know more about the recommendations.
Below is an edited transcript of the exclusive chat on CNBC-TV18
Q: You submitted—some would say practical and comprehensive—suggestions on what could be done by the government to improve the investment climate to make it easier for businesses to conduct transactions in India. Let me start by talking to you about specific recommendations you have made. You are not the first one to recommend doing away with the retrospective tax amendment. You follow what Parthasarathi Shome has also said. But are you hopeful that we are likely to see changes because our obsession with retrospective legislation doesn't seem to end? The recent Land Bill is a case in point where again retrospectivity has been worked into the legislation.
A: I hope we will live to see the day when this becomes a very rare event in our lives. Government—and we have noted this in the report—has the power to tax retrospectively. But because the power exists should you do it and unsettle what has been in settled position earlier?
That is a question you need to address. Yes, I am aware that many people have said the same thing before, especially in the context of one particular tax matter. There is no harm in more people reinforcing that premise.
Q: We do move away from retrospective legislation but you have also recommended a specific time limit for projects but you haven't specified what that limit ought to be. Did you not suggest the limit because that may not necessarily be the most practical thing to do for a committee and in your assessment what could that timeline be? We now have the Competition Commission of India (CCI) in operation to try and get over these issues regarding environmental clearances etc which delay projects but what to your mind would a suitable timeline be or time limit be?
A: We have made a recommendation that can be word to words. I am not saying that tomorrow morning somebody will lay down time limits but in matters where individual interests are involved like a building clearance or something, we want authorities to move away for something like sequential query -- who raise one question every three months then the person comes back with that response and then you raise another question. We want that to be a thing of the past and if somebody cannot within a reasonably long timeframe say yes or no then we believe that there must be a dimed permission.
Q: Let me go away from your report. As the former SEBI chief, I want to ask you for your view on the National Spot Exchange Ltd (NSEL) imbroglio; there are more shocking revelations everyday. How do you see the current mess and what is your prognosis on why and how this has happened?
A: I know nothing more than what is in the public domain through the newspapers. Clearly, something has gone wrong and I would reserve my opinion till I get to know what exactly has gone wrong, at what point of time and who is responsible to what extent.
Q: But doesn't it worry you that the very body that is looking at regulating commodity exchanges wasn't even empowered enough and we are now debating who should have had jurisdiction?
A: It is easy to rush to judgment but let us wait till everything is before us and then let the appropriate authorities arrive at the appropriate conclusions.
Q: Since the NSEL issue has raised questions on regulatory over lapse again, what do you believe the solution is? Is the Financial Development and Stability Council (FSDC) the answer to addressing the issue of regulatory over lapse because that is what the government seems to believe?
A: I have gone public and said no. When you are creative regulatory organizations and empowering them, the answer is coordination, informed coordination where all people understand what the issue is and together find solutions. Brining a super body again essentially comprising the same paper but headed by the ministry is undermining the entire basis of autonomous regulatory organizations then they become attached to subordinate offices of the ministries and that is a solution worse than the problem.
Q: I want to talk to you about your take on the market and the dependence on what the Fed may or may not do, when and how much it will taper. This seems to be what is driving our markets up or down. Your thoughts on that.
A: The way I look at it is that the Fed should— and I think that is what they should do—look at what suits the US best. It is true that markets world over do tend to get affected because of the actions on the Fed, the statements of the Fed and all of that but these are not the things that should occupy our minds as much as they do at this point of time.
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