Mauritius to ease India investments under Foreign Portfolio Investor rules
These rules are designed to open up India’s securities market to a broader range of potential investors, and with help from economies like Mauritius to attract investments into India, could achieve just that much needed push to Indian economic growth. (Image: Reuters)
The new investment framework introduced by Indian market regulator Securities and Exchanges Board of India (SEBI) was the focus of discussion at a seminar held Thursday July 24, 2014 at the Ebène Cybertower.
The Foreign Portfolio Investor (FPI) rules, as the latest legislation is called, was the topic of a presentation spearheaded by representatives from HSBC Mauritius and HSBC India.
The FPI came into effect on June 1, 2014 with the aim of modernizing the process of foreign investments into India.
Through this new framework intended for foreign investments, the Indian authorities are aiming for an investment route that is simpler and speedier than the former regulation permitted.
Alastair Bryce, CEO, HSBC Mauritius, highlighted that 35% of all investments into India get routed through Mauritius, which shows that the island economy is considered as one of the foremost economies helping channel investments into India.
According to him, these changes have an important impact on investors and banks but it is important to note that the general feeling of uncertainty has a deeper impact on India-focused investments.
Alastair Bryce added that inflows of foreign direct investments (FDI) into India between April 2013 and January 2014 amounted to $18.79 billion (approximately Rs 574.72 billion), representing a decline of 2% compared to the same period of the previous year.
“This situation is not advantageous for any party. However, we have to remain confident that a combination of factors exists for the time being and that we will ultimately arrive at a positive outcome,” he highlighted.
Alastair Bryce took comfort from the fact that there is a clear recognition by the new government in India of the fact that attracting higher investment to India is crucial for developing infrastructure, which is the foundation of the economic progress of a nation.
He also expressed the belief that the strong existing links between Mauritius and India would ensure that Mauritius preserves its standing in terms of investments directed to India.
For Yogesh Ajinka, Senior Vice President, Business Development, HSBC Securities Services, India, the new rules under the FPI framework have been designed with the aim of throwing open the securities market to more and more potential investors.
Foreign Institutional Investor (FII) rules are in force since the last twenty years and the new regime of FPI includes rules of Qualified Foreign Investors (QFI), offering more opportunities for foreign investors in the process.
Earlier this year, Kapil Seth, managing director, HSBC Securities Services, India, described the FPI rules as “evolutionary”.
These rules, designed to open up India’s securities market to a broader range of potential investors, have been two years in the making and required significant effort from various departments across the Indian Ministry of Finance and the wider government from planning to implementation.
Having said this, even while the investment rules were cumbersome and change in the legislation was overdue, India has certainly not been closed to foreigners.
Seth noted that since January 2012 to the end of this year’s first quarter, some $48 billion flowed into India as foreign investment in equities, estimating that foreign investors now hold 20% of the market, up from 15% back in 2011.
Yet India’s economic growth has moderated over the past two years. The government of India recently reported that its economy expanded at an annual rate of 4.7% in the three months to December. Only two years ago, its growth rate was about 8%.
This implies the need for some real change in the process of foreign investments in India, and the FPI rules, with help from economies like Mauritius to attract investments into India, could achieve just that much needed push.