‘Easing of rules will attract more foreign retail participation in equities’

Economic Affairs Secretary Anuradha Thakur talked about the Budget’s revenue assumptions, the alleged lack of sufficient buffers to address the external uncertainties, and the upcoming review of the inflation-targeting framework in a post-Budget interview with Prasanta Sahu and KG Narendranath. Excerpts:

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What is the intent behind allowing foreigners to invest directly in the equity market under the Portfolio Investment Scheme (PIS)?

We are extending the facilities currently available to NRIs and OCIs (Overseas Citizen of India) to all persons resident outside India, including foreign individuals. Earlier, foreign retail investors did not have access through this route and had to invest via the FPI or FDI channels.

Now, the individual investment limit under the PIS has been raised to 10% from 5%, and the overall limit in a company has been increased to 24% from 10%. This is aimed at easing access and improving the ease of doing business. Foreign retail investors who are interested in Indian companies will find this route simpler compared to registering as FPIs.

Currently, they need to register as FPIs, which involves significant compliance. Only 88 individuals have registered as FPIs so far, with assets under custody of about %400 crore. We felt this route was under-utilised and that liberalisation, after consultations, would help attract wider participation.

That said, safeguards will remain. We will now work with regulators to determine the necessary compliance framework. The intention is to keep it far less compliance-heavy than the FPI route while ensuring regulatory comfort.

The issue of capital outflows may need broader measures like raising foreign direct investment ceiling in residual sectors like banking and easing of portfolio investment caps. Are such steps to be expected?

There are ongoing discussions in some sectors, including banking. Individual departments are firming up proposals, and these will be taken up in due course.