Sops to FIIs but doing business in India still messy

P Chidambaram
New Delhi, March 23: Even as Finance Minister P Chidambaram today announced further liberalisation of FII investment norms, US investors and officials feel that doing business in India is ''messy".

Addressing the National Editors Conference in New Delhi today, Chidambaram said with liberalisation of FDI and other measures, the government has travelled considerable distance on the road to fiscal consolidation and reforms.

To demonstrate the intent, he said, further liberalisation of norms for investment by Foreign Institutional Investors (FIIs) in government securities and corporate bonds have been rationalised.

"There were a number of sub divisions and in order to rationalise, it is proposed to merge the existing sub limits and create only two broad categories," he said.

One category of basket, he said, will consist of government securities of $ 25 billion and the second basket will consist of all corporate bonds of $ 51 billion.

"Therefore from April 1, there will two baskets, one of $ 25 billion for government securities and (the other) of $ 51 billion for all corporate bonds," he said.

Promising more reforms, Chidambaram said that "we are steadily and surely working on next generation of reforms". The recent economic reforms include liberalisation of foreign direct investment (FDI) norms in multi-brand retail and aviation, partial deregulation of diesel prices and cap on supply of subsidised LPG.

Chidambaram also announced that the current SEBI auction mechanism allocating debt limits for corporate bonds will be replaced with the system similar to the infrastructure bonds.

"In order to allow large investors to plan their investments, government will review the foreign investment limit on corporate bonds when 80 per cent of the current limit is reached," he said, adding the limit on government bonds will be enhanced as and when needed.

However, in order to provide a guide to investors, he said, "I am happy to state that the annual enhancement of the government bond limit will remain within 5 per cent of the gross annual borrowing of the central government excluding buybacks".

Meanwhile in Washington, at a two-hour long meeting held at the Treasury Department, convened by the Under Secretary of Treasury, Lael Brainard, a select group of American investors, corporate leaders and official gave a free and frank assessment of the current investment climate in India, where they said are eager to pump in their money.

But the US investors and officials have told a visiting top Indian official that doing business in India is "messy". "I do understand that many of you may have difficult time in doing business in India. Many of you yesterday told me and I quote, "doing business in India is messy" unquote," the Economic Affairs Secretary Arvind Mayaram said at a reception hosted for him by the US India Business Council (USIBC) yesterday.

At the end of the meeting, the Indian official pointed out that "we are partners in distress".

During the meetings and also on the Friday reception, Mayaram assured the investors and US corporate sector that the Indian government is determined to take the necessary hard decision to improve upon the climate of investment and make it business friend as quickly as possible.

"I think, you need to stay the course. You need to be there. We are a work in progress, because we are a developing country. We still need to improve our systems and we will continue to move in that direction. I can assure you that as time goes by, doing business in India will not be as messy as you think it is today," he said.

OneIndia News

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