Foreign Investment In India | "Policy on Foreign Investment in Power Trading Exchanges"

By: Invest In India
Source: http://investinindia.com
Category: Foreign Investment In India

The Cabinet Committee on Economic Affairs has approved the proposal of the Department of Industrial Policy & Promotion for permitting foreign investment up to 49 percent, in Power Trading Exchanges.

The CCEA has decided to permit foreign investment, up to 49 percent (FDI & FII) [FDI limit of 26 per cent and FII limit of 23 per cent of the paid-up capital], in Power Trading Exchanges, in compliance with SEBI Regulations; Central Electricity Regulatory Commission (Power Market) Regulations, 2010; and other applicable laws/ regulations; security and other conditionalities. FII investments would be permitted under the automatic route and FDI would be permitted under the government approval route. This is subject to the conditions that FII purchases shall be restricted to secondary market only, and no non-resident investor/ entity, including persons acting in concert, holding more than 5 percent of the equity in these companies.

The approval is expected to strengthen the power trading exchanges and to enhance the availability of power, as well as improve its distribution for inclusive development. Introduction of global best practices, concomitant with the induction of FDI, is expected to lead to higher service standards in power trading exchanges.

As per extant policy, FDI, up to 100 percent, under the automatic route, is permitted in the power sector (except atomic energy). This includes generation, transmission and distribution of electricity as well as power trading, subject to the provisions of the Electricity Act, 2003. There is, however, no specific dispensation, under FDI policy, for power trading exchanges. The extant FDI policy permits foreign investment, up to 49 percent (FDI & FII) [FDI limit of 26 per cent and an FII limit of 23 per cent of the paid-up capital], in infrastructure companies in securities markets, namely, stock exchanges, depositories and clearing corporations, in compliance with SEBI Regulations. While FII investment is on the automatic route, FDI is allowed under the government approval route. Foreign investment in commodity exchanges is also allowed on the same lines.

Power trading is the purchase of electricity for resale thereof, while a power trading exchange provides an organized platform for fair, neutral, efficient and robust price discovery; extensive and quick price dissemination; and price risk management for the generators, distributors, traders, consumers and other stakeholders in the power sector. Power trading exchanges are transparent electronic platforms which help promote competition in power markets. They are in a nascent stage of development in India. In view of the functions they perform, as also their utility in the transfer of power from surplus to deficit areas, these exchanges need to be promoted, through greater investment and induction of global best practices, modern management skills and latest technology. Hence, there was a felt need to allow foreign investment into these exchanges.

Source: http://investinindia.com/news/policy-foreign-investment-power-trading-exchanges-12c3

Foreign Investment In India | "India to allow foreign investment in retail, aviation"

By: Associated Press
Source: http://photoblog.nbcnews.com
Category: Foreign Investment In India

The government's surprise announcement Friday that it will allow foreign investment in retail and aviation and the sale of minority stakes in four state-run companies evoked sharp criticism from opposition parties and some of the ruling Congress party's coalition allies. A day earlier, the government announced a hike in the price of diesel fuel.
Hundreds of supporters of the Hindu nationalist Bharatiya Janata Party held a rally in New Delhi demanding that the government reverse its decisions, saying they would hurt the poor.

Source: http://photoblog.nbcnews.com/_news/2012/09/15/13886134-india-to-allow-foreign-investment-in-retail-aviation?lite

Foreign Investment In India | "Govt okays 8 foreign pharma investments"

By: Agencies/New Delhi
Source: http://www.gulf-times.com
Category: Foreign Investment In India

India has approved eight foreign investments in drugmakers worth $333mn in total, signalling the finance ministry may be winning a battle to open up the country’s fast-growing markets and giving a boost to global drugmakers hungry for growth.
As a condition of its approval, however, the government said the foreign companies including US-based Pfizer and Germany’s B-Braun would have to continue producing cheap drugs and maintain spending in ongoing research and development projects run by their Indian partners for five years.
Since becoming finance minister last month, P Chidambaram has directed officials to fast-track foreign direct investments (FDI) as part of a drive to revive investor confidence after India’s economy grew at its slowest pace in nearly three years.
Proposals had been delayed for months due to a lack of clarity over government policy, with some government bodies expressing concerns that medicine prices might rise after a few Indian drugmakers sold businesses to overseas rivals.
In all, Chidambaram approved 21 foreign direct investment proposals totalling Rs24.1bn ($433.5mn) on the recommendation of the Foreign Investment Promotion Board (FIPB).
The proposals were cleared after the government decided to allow up to 49% foreign direct investment in domestic companies with conditions, two government sources said.
The present rules allow 100% foreign investment for new companies being set up in India while overseas investment in existing companies needs FIPB approval.
The government did not give details of the investments.
A McKinsey report earlier this year projected India’s pharmaceutical market would triple to $20bn by 2015 and move into the world’s top-10 pharmaceutical markets.
“The absolute growth of $14bn will be next to the growth potential of the US and China, and in the same league as the growth in Japan, Canada and the UK,” it said.
Abbott Laboratories bought Mumbai-based Piramal Healthcare’s Indian business for $3.72bn in 2010 while Ranbaxy founders sold a controlling stake in the company to Japan’s Daiichi Sankyo Company for $4.2bn in 2008.
Global drugmakers such as Pfizer, GlaxoSmithKline and Sanofi also have a significant presence in the country and are looking to expand their businesses there.
Abbott has the largest market share followed by India’s Cipla and GlaxoSmithKline.
Meanwhile, news reports said yesterday that the government is to propose watered down legislation later this month to open up the retail sector to foreign supermarkets.
The Mail Today tabloid and Hindustan Times reported that the government would propose allowing groups such as US giant Wal-Mart or French multinational Carrefour to own up to 49% of local subsidiaries.
The legislation would also include provisions for state governments to set local conditions for the groups, a move designed to head off opposition to the highly controversial legislation.
Last December, the government, which has struggled to pass reforms, was forced to withdraw a proposal to allow foreign supermarkets to own up to 51% of their local subsidiaries.
Shopkeepers, opposition parties and even the Trinamool Congress, ally of the Congress-led United Progressive Alliance coalition came together to oppose the change in the law, saying it would destroy the livelihoods of small business owners.
The government sees foreign supermarkets as a way to improve the food supply chain and bring down prices, but the proposed legislation as reported yesterday might not be enough to attract them.
Allowing state governments to set conditions locally would increase the complexity of the regulatory environment and the 49% ownership cap would mean the groups would not have control over their Indian operations.
Any proposed legislation would also need to pass the parliament, which was disrupted almost every day of the last session which ended last Friday.
Foreign retail groups are already allowed in India, but they must run single-brand shops.

Source: http://www.gulf-times.com/site/topics/article.asp?cu_no=2&item_no=530707&version=1&template_id=40&parent_id=22

Foreign Investment In India | "Foreign Investors Buy Net 7.3 Billion Rupees of Indian Stocks"

By: Paresh Jatakia
Source: http://www.businessweek.com
Category: Foreign Investment In India

Overseas investors bought a net 7.3 billion rupees of Indian stocks yesterday, raising their investment in the equities this year to 644.1 billion rupees, or $12.5 billion, according to the nation’s market regulator.

Foreigners bought 20.3 billion rupees of shares and sold 13 billion rupees, the Securities & Exchange Board of India said on its website today. They sold a net 1.62 billion rupees of bonds, reducing their inflow into debt this year to 229.9 billion rupees, the data show.

The benchmark BSE India Sensitive Index (SENSEX) has increased 15 percent this year, helped by the biggest overseas equity flows among 10 Asian markets tracked by Bloomberg. Flows surged to a record in 2010, making the Sensex the best performer among the world’s top 10 markets. The largest-ever outflow in 2008 led the biggest annual slump of 52 percent.

Foreigners have invested 5.088 trillion rupees in stocks and 1.437 trillion rupees in bonds since they were allowed into the country in 1993.

The regulator provides data on shares bought and sold by large investors, including trades in the primary and secondary markets, with a delay of at least a day.

Source: http://www.businessweek.com/news/2012-09-11/foreign-investors-buy-net-7-dot-3-billion-rupees-of-indian-stocks

Foreign Investment In India | "Foreign Car Makers to Enter Pre-owned Car Business in India"

By: Xinhuas
Source: http://english.cri.cn
Category: Foreign Investment In India

Many foreign car manufacturers are entering into pre-owned car business in India as the used car segment is huge and lucrative with many middle class families who cannot afford new cars now prefer to buy second hand cars.

In a bid to shed its premium tag and shore up volumes, Czech car maker Skoda is working at entering the pre-owned car business in India by the end of the year.

The move comes on the back of increasing attempts by car companies to expand volumes in a sluggish market by initiating new customers into their brands through pre-owned vehicles and retaining older ones through loyalty programs.

Sudhir Rao, managing director, Skoda India, said, "We are working on putting in place a comprehensive growth strategy to penetrate deeper into the country with our range of products. We will not trigger discount wars to boost numbers but we are working on entering the pre-owned cars business to introduce more customers to our brand by the end of the year."

While the specifics of the used-car business are still being worked out, Skoda is ramping up efforts to expand overall reach by setting up 150 dealerships by 2014-15. The company has 102 outlets in India at present.

Though the Indian subsidiary at present contributes a little over three percent to Skoda's sales globally, Rao said the company was infusing 3 billion rupees (54.5 million U.S. dollars) to increase the local contents in its products and reduce cost of ownership to raise volumes "substantially" in the country and to achieve sales tally of 1.5 million units worldwide by 2018.

Automobile manufacturers are increasingly focusing on sales of pre-owned vehicles to expand volumes in a market where off-take of new vehicles have waned due to high interest rates, increased fuel costs, and uncertain economic conditions.

An automobile industry expert in India said the "pre-owned car business units not only provide dealers with opportunities to improve margin by selling used cars, they can also increase their sales of new vehicles through exchange programs."

For the quarter ended June 30, Maruti Suzuki expanded volumes by 18 percent to 60,467 units in sales made under exchange programs despite its sluggish performance in the domestic market.

"In urban areas where demand has fallen sharply, we are trying to push sales through our loyalty programs. Around 1.5 million customers service their vehicles every month, 10 percent of whom own vehicles which are more than 10 years old. We identify these consumers and offer them loyalty bonus to exchange their cars for new ones," said a senior executive at Maruti Suzuki.

Additionally, the company registers sales of pre-owned cars. The used car market in India stands at 2.7 million units but over 85 percent of it is currently controlled by players in the unorganized sector.

The convenience and warranty being offered by companies like Maruti Suzuki, Hyundai Motor India, Mahindra and Mahindra and Ford India are increasingly making consumers opt for purchase and sale of pre-owned vehicles through the organized route.

The Maruti Suzuki executive pointed out that around 30 percent of car buyers exchange old vehicles for new ones.

In the last financial year, Maruti Suzuki sold as many as 240, 000 pre-owned cars which is nearly a quarter of its overall sales of new vehicles. Hyundai Motor retailed pre-owned vehicles amounting to 15 to 16 percent of its sales in the domestic market through Hyundai Advantage outlets last year.

Source: http://english.cri.cn/6826/2012/09/10/3241s721601.htm

Foreign Investment In India | "Govt looking at riders for foreign investment in pharma"

By: NEW DELHI
Source: http://www.thehindubusinessline.com
Category: Foreign Investment In India

Foreign pharmaceutical companies looking to acquire Indian drugs businesses are likely to face tougher conditions as the Health Ministry is working on new rules to ensure the availability of medicines at affordable prices in the local market, a senior official said on Monday.

The Ministry has suggested that after acquisitions, companies should at least over the next five years keep manufacturing certain life-saving medicines in India at the highest level of production they have recorded in the previous three years, Arun K. Panda, Joint Secretary at the Ministry For Health and Family Welfare, told Dow Jones Newswires.

Also, acquired companies would have to maintain research and development spending for a similar period on drugs that are relevant to the Indian market, Panda said.

There has recently been a lot of confusion over India’s approach to foreign investment in the pharmaceuticals sector. The country is seen to be moving away from the liberal regime put in place in 2002 that allowed 100 per cent foreign investment without Government review.

CROSS-BORDER DEALS

In recent months, the Government has started reviewing all cross-border deals and is considering forcing companies that acquire Indian assets to meet certain conditions to satisfy health activists and others who fear giving greater control of the local market will allow foreign companies to increase the prices of generic drugs or push the sales of costlier branded products.

Some multinational companies operating here are unhappy with tough decisions in recent years by the patent office and Indian courts in rejecting drug patents recognised in many Western nations.

The Government decided to revisit its investment policy for the pharmaceuticals sector last November after a spate of foreign takeovers of Indian companies in recent years.

The significant deals were Japan-based Daiichi Sankyo Co.’s purchase of a majority stake in Ranbaxy Laboratories Ltd in 2008 and US-based Abbott Laboratories’ acquisition of the local generic-drugs business of Piramal Healthcare Ltd in 2010.

Keywords: Foreign pharmaceutical companies, acquisitions, medicine prices, life-saving medicines, foreign investments, multinational companies, patent rows,

Source: http://www.thehindubusinessline.com/industry-and-economy/economy/article3882391.ece?homepage=true&ref=wl_home

Foreign Investment In India | "India Poised to Compete For Chinese Foreign Investment"

By: 2point6billion
Source: http://atlanticsentinel.com
Category: Foreign Investment In India

China aside, the smart money in Asia right now is on India as the emergence of the nation as a destination for foreign investment becomes more understood.

India’s main problem, however, remains one of perception—it has a noisy, democratic media that loves to blow up scandals and bad news. By comparison, China pushes its troubles under the carpet through extensive media censorship. That has worked for China to a large degree and has served to underplay inherent financial and political problems in the country but that’s not to say they don’t exist.

In India, everything is aired publicly, creating a disparity of news information when the two are compared—China good, India dirty.

Perceptions aside, the reasons for India’s growing attractiveness as a China alternative are numerous. Firstly, as China has become wealthier, labor costs have increased dramatically—and this is effectively making China less competitive when talking about export driven manufacturing. That business is now leeching away to other emerging Asian nations, with India among the main recipients. That doesn’t mean China based manufacturers are leaving necessarily—it’s just that to financially justify establishing a manufacturing base in China today means that one should be looking at servicing the Chinese consumer market; and not all products are suitable for China.

China’s own development demographics have changed as well—twenty years ago, the average age of a Chinese worker was twenty-three. Now, that average age is roughly thirty-seven and that employee requires a far higher income than before. Interestingly, the average age of an Indian worker today is twenty-three—the same as China twenty years ago.

“We are seeing more interest in FDI into India than ever before,” comments Olaf Griese, partner at Dezan Shira & Associates in India. “Businesses have woken up to the fact that India is also a hot destination and, having established China holdings, many are now setting up operations in India as well. The two nations are complimentary investment destinations and now it is India’s turn.”

On top of this, the Asian trade dynamics are altering, with the Southeast Asian trade bloc ASEAN about to come into full tax free status in 2015. That is altering manufacturing investment patterns as businesses wishing to sell to Asia are now increasingly looking at doing so in ASEAN, using Singapore as a regional financial and services hub to access markets in Vietnam, Indonesia, Thailand, Malaysia and the Philippines. The faster growth potential lies in these countries as opposed to China—and India, with its DTA with ASEAN, permits duty free movement of over four thousand different product and goods categories with the entire region and more to follow as the DTA still has many more under negotiation.

At present, India’s ASEAN strengths lie in the exporting of telecommunications and electronics products—a major competitive area with China. Add to that logistics, education and financial services and it is clear that India is going to become a long term player in Asia in these key industries.

In terms of investing into India, many corporations are using Singapore as a regional hub. The city state is the de facto financial and services hub for ASEAN and, to some extent, is pushing subsidiary operations into India. That too echoes China, when twenty years ago Hong Kong was under British jurisdiction yet was still considered a gateway to China—a role it has since gone on to develop even further. Singapore does not levy taxes on profits realized externally from its borders and this promotes its use as a regional hub for Southeast Asia.

Also of interest in the China–India comparisons are the consumer values. While much has been made of the rise in Chinese consumer wealth, the India market also has a well established middle class consumer base of the same size—about 250 million. The differences between them lie in their spending behavior. China’s nouveaux riches tend to spend more on glitz and glamor while Indian money is older, more conservative in taste and more discretely spent.

This article by Dezan Shira & Associates, a specialist foreign direct investment practice, originally appeared at 2point6billion.com, September 7, 2012.

Source: http://atlanticsentinel.com/2012/09/india-poised-to-compete-for-chinese-foreign-investment/

Foreign Investment In India | "Indian PM vows to attract more foreign investment"

By: BEN SHEPPARD
Source: http://india.nydailynews.com
Category: Foreign Investment In India

Indian Premier Manmohan Singh on Wednesday used his Independence Day speech to promise to improve conditions for foreign investment in the country after a sharp downturn in economic growth.
India recorded near double-digit expansion over much of the last decade but the economy grew by just 5.3 percent in the January-March quarter, a rate that threatens to stall its transformation since the early 1990s.
Singh said that the government would "leave no stone unturned to encourage investment", and vowed to increase spending on much-needed infrastructure projects such as roads, railways and the electricity network.
"To attract foreign capital, we will have to create confidence at the international level that there are no barriers to investment in India," Singh said, signalling that further liberalisation reforms were in the pipeline.
Foreign companies keen to tap into India's emerging consumer market have poured into the country, but have often struggled to thrive amid government policy U-turns, endemic corruption and red tape.
Foreign direct investment into India collapsed by 65 percent year-on-year in the April-June quarter, according to the Reserve Bank of India.
The ruling Congress party is already concerned about general elections due in 2014, and the prime minister has launched a campaign to revive its flagging fortunes since P. Chidambaram was named as finance minister two weeks ago.
Singh, delivering the annual Independence Day address at the Red Fort in Delhi, said that "a difficult phase" for the world economy had merged with India's domestic situation to hinder growth.
"We cannot do much about the conditions that prevail outside our country," he said. "But we must make every effort to resolve the problems inside our country so that our economic growth (is)... again speeded up."
He added that growth must be obtained while controlling inflation, which is likely to be stoked by this year's poor monsoon -- though the headline rate unexpectedly dropped to 6.87 percent in July from 7.25 percent in June.
Singh, 79, who is expected to step down at the end of his term, repeated his forecast that annual GDP growth would exceed last year's rate of 6.5 percent, a prediction dismissed by opposition leaders and many independent economists.
Ratings agency Moody's last week scaled down its growth outlook for Asia's third largest economy to 5.5 percent in the fiscal year ending March 2013.
The Congress-led government elected in 2009 has struggled to push legislation through parliament due to constant protests by opposition parties and even its coalition partners.
Singh blamed the lack of political consensus for the failure to create rapid economic growth and said that the problem was damaging stability in India.
"If we do not increase the pace of the country's economic growth (and) take steps to encourage new investment in the economy... then it most certainly affects our national security," he said.
Among moves that have spooked foreign firms was the announcement followed by the sudden withdrawal of reforms allowing retail giants such as Wal-Mart into India, as well as a retrospective tax bill for Vodafone.
The premier's speech, marking the end of British rule in 1947, also included a vow to provide electricity to all households within five years and proposals for a new law to end the "repulsive practice" of manual removal of human waste.
The main opposition Bharatiya Janata Party (BJP) dismissed the speech as lacklustre and uninspiring.
Police said no one was injured when four roadside bombs exploded in the northeastern state of Manipur, which has seen decades of separatist violence.

Source: http://india.nydailynews.com/newsarticle/cd1ece9aabf62cdde1f0658c0b86d77f/indian-pm-pledges-to-attract-more-foreign-investment

Foreign Investment In India | "Foreign Investors Buy Net 3.03 Billion Rupees Of Indian Stocks"

By: Paresh Jatakia
Source: http://www.bloomberg.com
Category: Foreign Investment In India

Overseas investors bought a net 3.03 billion rupees ($54.2 million) of Indian stocks yesterday, raising their investment in the equities this year to 631.8 billion rupees, according to the nation’s market regulator.
Foreigners bought 16.3 billion rupees of shares and sold 13.3 billion rupees, the Securities & Exchange Board of India said on its website today. They purchased a net 106.1 billion rupees of stocks last month.
The benchmark BSE India Sensitive Index (SENSEX) has increased 12 percent this year, helped by the biggest overseas equity flows among 10 Asian markets tracked by Bloomberg. Flows surged to a record in 2010, making the Sensex the best performer among the world’s top 10 markets. The largest-ever outflow in 2008 led to the biggest annual slump of 52 percent.
Offshore funds bought a net 1.64 billion rupees of bonds yesterday, taking total inflow into debt this year to 248.8 billion rupees, the data show.
Foreigners have invested 5.076 trillion rupees in stocks and 1.456 trillion rupees in bonds since they were allowed into the country in 1993.
The regulator provides data on shares bought and sold by large investors, including trades in the primary and secondary markets, with a delay of at least a day.

Source: http://www.bloomberg.com/news/2012-09-05/foreign-investors-buy-net-3-03-billion-rupees-of-indian-stocks.html

Foreign Investment In India | "Foreign Investors Sell Net 471 Million Rupees of Indian Stocks"

By: Paresh Jatakia
Source: http://www.businessweek.com
Category: Foreign Investment In India

Foreign investors sold a net 471 million rupees of Indian equities yesterday, reducing their investment in the nation’s stocks this year to 628.8 billion rupees ($12 billion), according to the market regulator.

Offshore funds bought 16.6 billion rupees of shares and sold 17.1 billion rupees, the Securities & Exchange Board of India said on its website today. They purchased a net 106.1 billion rupees of stocks last month.

The benchmark BSE India Sensitive Index (SENSEX) has increased 13 percent this year, helped by the biggest overseas equity flows among 10 Asian markets tracked by Bloomberg. Flows surged to a record in 2010, making the Sensex the best performer among the world’s top 10 markets. The largest-ever outflow in 2008 led the biggest annual slump of 52 percent.

Offshore funds bought a net 3.43 billion rupees of bonds yesterday, taking total inflow into debt this year to 247.2 billion rupees, the data show.

Foreigners have invested 5.073 trillion rupees in stocks and 1.455 trillion rupees in bonds since they were allowed into the country in 1993.

The regulator provides data on shares bought and sold by large investors, including trades in the primary and secondary markets, with a delay of at least a day.

Source: http://www.businessweek.com/news/2012-09-04/foreign-investors-sell-net-471-million-rupees-of-indian-stocks

Foreign Investment In India | "Indian equities eyes big GCC investment "

By: TradeArabia
Source: http://www.tradearabia.com
Category: Foreign Investment In India

The investments into Indian equities, bonds and mutual funds by foreign nationals, mainly those from the GCC, through the new qualified foreign investor (QFI) route could cross the $10 billion mark in the next two years, said experts.

QFI, the new investment channel opened up by the Indian government in the beginning of this year allows foreign nationals from 45 countries from across the world, including the UAE, to invest in Indian equities and debt instruments.

The move is widely believed to have the potential to attract billions of dollars into India, which is currently among the world’s top three investment destinations.

“The new investment route provides direct access to the Indian equity and debt markets for foreign nationals, groups or associations, allowing a wider global investor base to partake the benefits of the Indian growth story,” remarked Sajith Kumar PK, the CEO & director of IBMC Group & JRG International.

According to him, the foreign investments into Indian stocks and debt instruments were earlier limited to pension funds and FIIS (Foreign Institutional Investors) only.

But now with the QFI, the markets have the potential to match or even overtake the current volume of FII investment volumes into the Indian markets in the next two to three years.

Overseas investments into Indian stock markets in 2012 has touched $12 billion so far including more than $1 billion in August this year alone, he added.

Launching the new QFI service, Sanjay Verma, Consul General of India, pointed out that the UAE and India shared extensive trade and commercial bonds and were also each other's biggest trade partners.

"The UAE, being a regional trade and investment hub, is an ideal location to promote this new initiative," said Verma during a first-of-its-kind international seminar held at the Dubai World Trade Centre which was attended by an audience of over 15 nationalities.

The event also marked the awarding of the first QFI account to Hazza Mohammed Al Dhaheri, the chairman and managing director of IBMC Group & JRG International, by S Rengarajan, CEO, IL&FS Securities Services.

Commenting on the rationale of holding the international seminar and the QFI regime, Al Dhaheri said, Dubai, being the business hub of the region offered a vantage point to launch the service.

Bombay Stock Exchange CEO Ashishkumar Chauhan said the new QFI holds a lot of potential for Indian markets.

"There is keen global interest in the resilience of our economy. Traditionally driven by FIIs and NRIs, foreign capital inflows have gained significant importance and impact local market sentiments. QFIs would broad-base the capital flow and further deepen liquidity for Indian markets," he explained.

PS Reddy, the CEO  & MD of Central Depository Services (India) said: "India’s growth story is to continue for next few decades. But it needs huge investment support both from internal and external sources."

"The new QFI route is opened up for those who want to have the benefit of India’s growth. There is no better region than Gulf region which is more inclined towards India as an investment destination," he added.-TradeArabia News Service

 Source: http://www.tradearabia.com/news/CM_222571.html

Foreign Investment In India | "Reserve Bank of India moves to reassure foreign investment"

By: The Information Daily
Source: http://www.egovmonitor.com
Category: Foreign Investment In India

India needs to show it has a stable taxation and investment regime in order to attract foreign direct investment says D. Subbarao, Governor of the Reserve Bank of India 

In a speech to the Asia Society earlier in the week The Governor of the Reserve Bank of India (RBI) waded into the current debate on retroactive taxation provisions, which the Indian Finance Ministry has now said would be deferred.

The Central Government in its 2012/13 budget introduced a retroactive taxation provision following the government’s defeat in the Supreme Court that threw out the tax demand on the Essar-Vodafone deal.

In addition, the 2012/13 Finance Bill also introduced provisions in which investors would have to demonstrate proactively that they did not need to pay additional taxation rather than relying on the IRS to identify the taxation required

These policies have had an adverse impact on India’s foreign direct investment.  The RBI Governor in his speech and the subsequent question and answer session tried to allay the fears of foreign investors.

D. Subbarao claimed that India still has an investor friendly environment with the central and state governments anxious to attract investment. However, he acknowledged that India needs to demonstrate it has consistent policies which are investor friendly.

"We need to streamline our foreign investment policy and procedures, improve infrastructure, improve our governance," he said.  "Potential foreign investors have to have confidence that India has a stable, predictable, transparent capital sector regime".

Source: http://www.egovmonitor.com/node/53694

Foreign Investment In India | "India shines in Asia on stable earnings, reform hopes"

By: BS Reporters
Source: http://www.business-standard.com
Category: Foreign Investment In India

Despite a worsening macroeconomic scenario, overseas investors continue to prefer Indian shares over their emerging markets and Asian peers due to stable corporate earnings, expectations of government action and increasing probability of further global monetary easing.

Foreign institutional investors (FIIs) have poured in about Rs 62,412 crore ($11.76 billion) into Indian shares this year till August 27, Securities and Exchange Board of India (Sebi) data showed. This is the highest among Asian countries for which Bloomberg compiles data.The Bombay Stock Exchange (BSE) benchmark, Sensex has gained 13 per cent so far this year in rupee terms (7.6 per cent in dollar terms), making India one of the best performing markets in Asia. Indian shares have also outperformed other emerging markets like China, Russia and Brazil during this period. According to JP Morgan, Indian equities have outperformed other emerging markets in the last three months on expectations that the government would act. The foreign bank is of the view that the markets are hoping for government measures like a diesel price rise, allowing or increasing direct foreign investment limits in multi-brand retail and aviation and faster clearances for investment projects, particularly in the power and coal sectors.

However, JP Morgan strategists warn bulls are now getting edgy due to policy inaction. “The first volley of reforms was expected after the Presidential poll in late July. But this has not been the case. The monsoon session of Parliament has been stalled following the Comptroller and Auditor General of India’s report on coal block sanctions. Coalition allies continue to be reluctant on key reforms,” Bharat Iyer, executive director and head of India equity research at JPMorgan, stated in a strategy report early this week. “Expectations are now for the government to move in the eight-week window after the monsoon session of Parliament concludes (September 7) and before the state elections in Gujarat in November.”

Indian shares have also performed better than other comparable markets on anticipation of monetary easing by the US Federal Reserve and the European Central Bank (ECB), according to CLSA.

“Despite the continued downward earnings momentum in corporate earnings, MSCI India has moved up by five per cent over the last one month on increasing probability of further global monetary easing,” CLSA's India strategists Mahesh Nandurkar and Bhavesh Pravin Shah on Wednesday stated in a report. “While India is the best risk-on market, our analysis of the previous six global liquidity events highlights that market performance has been weak post facto if the index has already moved up on anticipation, which seems to be the case now."

However, strong FII inflows into India this year have also raised concerns among some market participants about their authenticity.

BNP Paribas, in a report early this month, stated almost half the FII flows in India seem to have come from unexplained sources.

“This could lend credence to the oft-repeated conspiracy theory that a lot of FII flows into India are, in reality, Indian money disguised as FII money,” said Manishi Raychaudhuri in a report early this month.

However, BNP Paribas is of the view that FIIs are buying Indian shares because of the country's relative earnings stability. “Over the past one to two quarters Indian earnings estimates have remained stable while those for large Asian peers have declined 7-10 per cent,” Raychaudhuri said in the report.

Raychaudhuri believes the answer to the riddle why FIIs are not selling India when selling the rest of Asia lies in the kind of stocks that FIIs have bought in India recently. “Over the past two to three quarters, FIIs bought predominantly stocks that offer visibility on revenues and earnings. The top 15 stocks, contributing 65 per cent of FII buying, fall largely in this category. In contrast, in 2008, FIIs sold India heavily when they sold the rest of Asia,” he said in the report.

Source: http://www.business-standard.com/india/news/india-shines-in-asiastable-earnings-reform-hopes/484833/