India may relax curbs on foreigners investing
By Erika Kinetz |
August 10, 2010, Tuesday
|
Print Edition
Print Edition
INDIA may allow foreign individuals to invest directly in its stock markets, said two people familiar with a new report prepared for the Ministry of Finance that recommends loosening capital controls.
The recommendation comes as top policymakers worry that global risk aversion could dampen foreign capital inflows, which India needs to fund its widening current account deficit and meet credit demand.
"There is already a first level evaluation. They are giving it now to the regulators to examine," said Ashvin Parekh, a partner at Ernst & Young in Mumbai, who helped advise the committee that prepared the report. A second person involved with the report, who spoke on condition of anonymity, also confirmed the recommendation.
India's financing needs are huge, especially for infrastructure projects, which some estimate could cost up to US$1 trillion. The government is also selling off minority stakes in large state-run companies as it seeks to plug the fiscal deficit.
But there are few long-term sources of capital available in a nation where investments by pension and insurance funds are tightly regulated and commercial banks are still the primary source of finance.
A 16-member committee was set up last November to evaluate capital controls in India, covering individual and institutional inflows as well as private equity and venture capital investment. It handed its report to the Ministry of Finance last week.
The recommendation comes as top policymakers worry that global risk aversion could dampen foreign capital inflows, which India needs to fund its widening current account deficit and meet credit demand.
"There is already a first level evaluation. They are giving it now to the regulators to examine," said Ashvin Parekh, a partner at Ernst & Young in Mumbai, who helped advise the committee that prepared the report. A second person involved with the report, who spoke on condition of anonymity, also confirmed the recommendation.
India's financing needs are huge, especially for infrastructure projects, which some estimate could cost up to US$1 trillion. The government is also selling off minority stakes in large state-run companies as it seeks to plug the fiscal deficit.
But there are few long-term sources of capital available in a nation where investments by pension and insurance funds are tightly regulated and commercial banks are still the primary source of finance.
A 16-member committee was set up last November to evaluate capital controls in India, covering individual and institutional inflows as well as private equity and venture capital investment. It handed its report to the Ministry of Finance last week.
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