"There is absolutely no question of India having turned against foreign investment," Ahluwalia told The Wall Street Journal.
Indian government's proposed amendment to the Income Tax Act, 1961, to bring into tax net Vodafone type overseas mergers and acquisitions involving domestic assets, has evoked sharp reaction from various quarters which feel it would hurt foreign investment.
The issue was also raised by UK Chancellor of Exchequer George Osborne with Indian Finance Minister Pranab Mukherjee yesterday in New Delhi. Several global business associations, in a letter to Prime Minister Manmohan Singh, had sought reconsideration of the retrospective amendment cautioning that the proposed changes could impact foreign investments into India.
Clarifying on the controversy, Ahluwalia said, "The policy (of India) remains one of strongly encouraging foreign direct investment, and also portfolio investment into India."
Pointing out the concerns are overblown, he said, "We are saying that as long as the asset in India is taxable, and whoever is buying the thing better pay the withholding tax". He regretted that some budget proposals had been "a little bit misrepresented". According to Ahluwalia, "What has happened is that there's been a profusion of news reporting, which is certainly giving the wrong impression".