The Central Government’s financial budget was announced wherein some foreign investment related policies were mentioned. There were changes proposed for foreign portfolio investors. The Indian Prime Minister declared India to be one of most open economies in the world. However, the dampener was India’s downward movement in the global corruption index, causing much concern for the overall governance and administration machinery.
Changes to FPI Rules – The government will reduce the time required for foreign portfolio investors (FPIs) to register in India, introduce a single-window clearance for them and allow foreign banks to trade on behalf of their clients without registering. The FPI registration process, which now on an average takes two months, is set to reduce to just 3-6 days by moving towards a single application and doing away with the requirement of obtaining a Permanent Account Number. The 2016-17 Union budget had proposed a single-window clearance for FPIs, but that proposal got stuck because of differences between the Securities and Exchange Board of India (Sebi) and the Central Board of Direct Taxes (CBDT).
“CBDT had wanted its set of documents, which took a little bit of time. But now we have come to a common ground and the department of revenue has agreed to a six-page form. Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standards (CRS) will be separately done by brokers or custodians,” said a Sebi official. CRS is an information standard for the automatic exchange of tax and financial information on a global level. In addition, Sebi will allow foreign private banks to trade on behalf of their clients without FPI registration.
India Among Most Open Economies – Pitching for foreign investments, Prime Minister Narendra Modi recently said India is one of the most open economies in the world and is ready to do business with the world. Speaking at the India-Korea Business Summit, he said his government had worked towards creating a stable business environment and removed arbitrariness in decision-making. “We seek positivity in day-to-day transactions. We are widening areas of trust rather than digging into doubts. This represents a complete change of the government’s mindset,” he said. Stating that the government is on a de-regulation and de-licensing drive, Modi said validity period of industrial licences had been increased from three years to 15 and more.
India Slips on Global Corruption Index – India’s ranking in the annual corruption index, released by Berlin-based non-government organisation Transparency International (TI), slid to 81 among a group of 180 countries. The Corruption Perception Index 2017 also singled out India as one of the “worst offenders” in the Asia-Pacific, together with Philippines and Maldives, with respect to situations where journalists, activists, opposition leaders and even staff of law enforcement or watchdog agencies are threatened, and in the worst cases, even murdered.
In 2016, India was in the 79th place among 176 countries. India’s ranking in the index had plummeted in 2013 and 2014 in the wake of the spectrum and coal scams. The ranking has improved since then, but seems to be showing signs of weakening. The index, which measures perception of corruption in the public sector, uses a scale of 0 to 100, where 0 is highly corrupt and 100 is very clean. India’s score remained intact at 40 points in both 2016 and 2017.
Union Budget 2018 – The Finance Minister, Arun Jaitley, announced the central’s government’s budget for FY 2018-19 earlier this month. The government will bring out separate policies on Outward Direct Investment (ODI) as well as hybrid instruments, Finance Minister Arun Jaitley said. Pointing out that ODI from India was about $15 billion per annum, Mr. Jaitley said in his 2018-19 Budget speech that “the government will review existing guidelines and processes and bring out a coherent and integrated ODI policy.” He also said that the government would evolve a separate policy for hybrid instruments, adding that “hybrid instruments are suitable for attracting foreign investments in several niche areas, especially for the start-ups and venture capital firms.” Mr. Jaitley said in his FY’19 Budget speech that as a result of the reforms undertaken by the government, the FDI had gone up. There is a financial outlay of ₹281 crore in FY’19 for Scheme of Investment Promotion (SIP) and Startup India. The SIP aims to make India among the top 10 most preferred FDI destinations in the world and among the top 50 in the ranking of countries by the World Bank on ‘Ease of Doing Business Index.’ Its objective is also to improve investor confidence to boost investment and economic growth.