Dinesh Kamath's Editorial 'Indian-origin FPIs has become an issue' that was published in Newsband

Indian-origin FPIs has become an issue

Indian-origin foreign portfolio investors has become quite an issue. A group of foreign portfolio investors (FPIs) to openly appeal to the Prime Minister for an urgent intervention in their matter.

Asset Managers Roundtable of India (AMRI) warned that India’s booming stock markets will be in for a tight bear-hug and the embattled rupee could face even greater pressure. The SEBI circular disqualifies about $75 billion of portfolio investments into India made by FPIs backed by domestic institutions, NRIs, Persons of Indian Origin and Overseas Citizen of India card-holders.

SEBI called AMRI’s warning as “preposterous and highly irresponsible”. But the H.R. Khan Committee set up by SEBI has removed any ambiguity and provided relief to foreign investors. Treating all FPIs with Indian-origin managers as potential conduits of illicit money is unwise. Such policy uncertainty and sharp about-turns will do little to enhance India’s credibility among global investors.

Mauritius remained the top source of foreign direct investment (FDI) into India in 2017-18 followed by Singapore. FDI from the Netherlands declined marginally. FDI into communication services rose. The inflows into retail and wholesale trade also shot up. Financial services too saw a rise. This reflects the global interest in new areas, including online marketplaces and financial technologies.

India remains a preferred destination for foreign direct investment (FDI) as domestic consumption remains strong, according to the RBI Annual Report. With manufacturing sector gathering momentum, helped by both services and agriculture sectors, consumption demand remains robust in the country making it an attractive investment destination, the report said. A normal monsoon for the third consecutive year should lift agricultural output. Manufacturing activity is gathering momentum

In the services sector, it said, the impulses of growth are broadening and expansion in employment conditions is generating anticipations of improvement in demand conditions. Consumption demand remains robust. Aggregate domestic demand is also being supported by steadily strengthening investment.

India remains a preferred destination for FDI. The increase in foreign capital flow was mainly due to higher flows into the communication services, retail and wholesale trade, financial services and computer services. FDI inflows were concentrated mostly in Mauritius and Singapore that accounted for about 61 per cent of total equity investments.

With the ongoing policy reforms in sectors ranging from single brand retail trading, civil aviation, real estate broking service and simplification of legal and regulatory system, India moved into the top 100 countries in the World Bank’s Ease of Doing Business global rankings. According to the UNCTAD’s Investment Trends Monitor (2018), India was the 10th largest recipient of global FDI in 2017 and remained the topmost destination for greenfield capital investment — even ahead of China and the US.