Cheetah786
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Jan 05, 2012
India opens up to foreign investors - MoneyWeek
The Indian government will allow foreigners to invest directly in its listed companies. Overseas investors have hitherto only been able to gain access to equities through buying funds. India hopes to woo back international capital after investors fled its markets last year.
What the commentators said
The move is an extension of the gradual process of liberalising Indias capital markets, said Standard Chartered banks Samiran Chakraborty. But how much money will actually come? The short-term outlook is quite a challenge. India was the worst-performing major stockmarket last year, while the currency, the rupee, was Asias weakest. Growth has slid unexpectedly sharply after 13 interest rate hikes by the central bank. The slowdown means that the governments deficit target of 4.6% of GDP is likely to be breached.
Inflation remains high at around 9%, and the tanking rupee is making it worse. The central banks hikes werent enough, said Lex in the FT. India is now paying the price for not capping inflation when the economy was robust enough to withstand tougher monetary policy and a curb on government spending.
Corporate corruption and foot-dragging on reforms have also damaged sentiment, said Tom Bawden in The Independent. The government performed a last-minute U-turn on allowing foreign supermarkets to enter the Indian market. Given all this, the governments latest move, while welcome in itself, is unlikely to tempt investors back quickly. Indeed, said Lex, after the supermarket U-turn, it just underlines the governments failure to open its economy more broadly to long-term inward investment.
India opens up to foreign investors - MoneyWeek
The Indian government will allow foreigners to invest directly in its listed companies. Overseas investors have hitherto only been able to gain access to equities through buying funds. India hopes to woo back international capital after investors fled its markets last year.
What the commentators said
The move is an extension of the gradual process of liberalising Indias capital markets, said Standard Chartered banks Samiran Chakraborty. But how much money will actually come? The short-term outlook is quite a challenge. India was the worst-performing major stockmarket last year, while the currency, the rupee, was Asias weakest. Growth has slid unexpectedly sharply after 13 interest rate hikes by the central bank. The slowdown means that the governments deficit target of 4.6% of GDP is likely to be breached.
Inflation remains high at around 9%, and the tanking rupee is making it worse. The central banks hikes werent enough, said Lex in the FT. India is now paying the price for not capping inflation when the economy was robust enough to withstand tougher monetary policy and a curb on government spending.
Corporate corruption and foot-dragging on reforms have also damaged sentiment, said Tom Bawden in The Independent. The government performed a last-minute U-turn on allowing foreign supermarkets to enter the Indian market. Given all this, the governments latest move, while welcome in itself, is unlikely to tempt investors back quickly. Indeed, said Lex, after the supermarket U-turn, it just underlines the governments failure to open its economy more broadly to long-term inward investment.
one that does not figure in the article itself.
