Chidambaram hardsells reform measures to foreign investors

K. R. Srivats New Delhi | Updated on November 20, 2017 Published on January 27, 2013

P. Chidambaram

As he begins his second leg of overseas tour on Monday, one is left wondering as to what more tricks are left in the bag of Finance Minister P. Chidambaram to further woo foreign investors.

He will tour Europe and hold meetings with investors in Frankfurt and London early this week.

Chidambaram does seem to have some aces up his sleeves to woo FIIs and foreign investors.

The effort this time round, it appears, will be to showcase ‘infrastructure debt funds’ (IDFs), which are seen as an ideal vehicle for foreign investors looking for a piece of the India infrastructure play.

Foreign institutional investors have already pumped in $16.7 billion in Indian equities since Chidambaram assumed office in August last year. This is being viewed as FIIs reposing faith in the Government’s policies and further inflows are expected in the coming days.

To provide a leg up to IDFs ahead of Chidambaram’s foreign tour, capital market regulator SEBI amended its IDF-MF regulations to enable FIIs to be inducted as strategic investors in such funds.

This regulatory relaxation will help the Finance Minister invite FIIs to own a part of the IDFs that will come about in the country.

So far, FIIs have pumped in $3 billion in Indian markets in 2013. They had invested over $24 billion last year.

Already, the spate of reform initiatives launched since Chidambaram assumed office in August last year has brought some comfort to the foreign investors.

There is some investor confidence returning after policymakers took some big missteps in last budget, leading to negative business sentiments.

The proposed introduction of GAAR and retrospective amendments to bring indirect share transfers to tax had irked foreign investors.

Clearly, India's policy momentum has been significant since August and the market has also responded with 22 per cent jump in dollar terms.

In his first leg of the foreign tour (to Hong Kong and Singapore) this past week, Chidambaram was decidedly more positive.

He provided a fair glimpse of the road ahead, in terms of his approach to the upcoming Budget.

Chidambaram has assured them that fiscal deficit target will be met, tax rates will not be hiked and the tax regime will be stable.

This is going to help boost investor sentiments.

The main policy decisions taken since August include opening up multi-brand retail to foreign investment, allowing diesel price hike, limiting the number of subsidised LPG cylinders and allowing foreign carriers to pick up to 49 per cent in domestic airlines.

For economy watchers and analysts, this will be a very eventful week with the RBI set to announce monetary policy review on January 29.

While the markets expect at least 25 basis point cut in repo rate, there are some who would prefer RBI to stand still given the inflation scenario in the country.

Another keenly watched announcement will be that of the US Federal Reserve, which will meet on January 29-30 to decide its future course on bond buying programme.

If RBI plays ball by reducing repo rates, it could cheer the foreign investors and corporate India.

A slew of corporate earnings from many bellwether companies like Bharti Airtel, ICICI Bank and BHEL will add some spice to the action packed week.

Future and options market expiry is also scheduled for Thursday.

Fasten your seat belts and brace up for lot of action as markets are expected to be on the edge on RBI announcement and corporate earnings.

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Published on January 27, 2013
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