Dubai: India’s finance ministry is working on an elaborate plan to attract portfolio investments from Gulf nationals and institutions as part of the government’s recent decision to allow qualified foreign investors (QFIs) to invest in Indian capital markets, said R. Gopalan, secretary of economic affairs at the Ministry of Finance.
Speaking to Gulf News during an interview ahead of a roadshow in Dubai to promote India as an attractive investment destination to Gulf nationals and institutions, Gopalan said the recent changes in investment rules have made investing in Indian capital markets easy for foreign nationals.
In a major policy decision, the Indian government announced in January that QFIs could directly invest in Indian equities. In its latest budget, the government also proposed to open the Indian corporate debt market to QFIs.
The QFIs will be allowed to invest only through the Securities and Exchanges Board of India-registered qualified depository participants (QDPs), which will also ensure they follow the ‘know your client’ (KYC) norms.
Gopalan said that as part of the government’s efforts to attract more investors to Indian equity markets, tax laws governing short-term capital gains have been simplified. “All QFIs investing in Indian securities can now pay their short capital gains tax through qualified depository participants (QDPs).
The Ministry of Finance expects to attract more than $75 billion (Dh275.40 billion) in portfolio investments through the QFI scheme in next two years.
So far the Indian government has approved direct QFI investments from 45 countries that are members of the Financial Action Task Force (FATF). The GCC is a full member of FATF. Countries such as Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and UAE are members of the Middle East and North Africa Financial Action Task Force, an associate member of FATF, and thus qualify for QFI investment scheme.
India which faced significant outflow of foreign institutional investments from its equity markets in recent months expects the QFI investments to bring in more stability in the portfolio investments into the country. “FII investments are generally very short term in nature. These investment flows are vulnerable to a number of global factors. We have seen high volatility on Indian markets in recent months because of fund withdrawals by some of the Western investors. We expect QFI investments — longer term in nature — to provide more stability to the market,” Gopalan said.
