In a session focusing on India, Sriram Krishnan, head of securities services for India at Deutsche Bank, reported that the country faces certain macroeconomic headwinds at this time. India’s GDP grew less than six percent for the first time in seven years as a slowdown in consumption, private investment and exports took their collective toll. Consumption, which has been India’s biggest growth engine fell to 3.1% in Q1, its lowest rate since Q3 2014, while exports continue to be volatile owing to the general slowdown in global growth and ongoing trade tensions. Furthermore, Krishnan added that collections from the much-anticipated Goods and Services Tax (GST), the country’s simplified tax code introduced in July 2017, had fallen somewhat below expectations.
However, India has made impressive strides to liberalise its economy, making it easier for foreign investors to trade in the domestic market. Krishnan said the local market had become more efficient, evidenced by the fact that India now ranks 63rd on the World Bank’s ‘ease of doing business’ index, having climbed up from 142nd place in 2014. As the country looks to reverse its economic slowdown, the Securities Board of India, or SEBI, has opted to further loosen restrictions on foreign investors accessing the market by reducing the number of foreign portfolio investor categories from three to two, continued Krishnan. Deutsche Bank have produced a video on AccessIndia, our web based portal, which helps clients obtain the FPI license expeditiously.
Under the latest revisions, Category 1 foreign portfolio investors will comprise all regulated institutions including sovereign wealth funds, central banks, pension funds, asset managers, portfolio managers and entities from Financial Action Task Force countries whereas Category 2 foreign portfolio investors now consist of charitable organisations, family offices, individuals, corporate bodies and unregulated funds such as limited partnerships and trusts. In addition, Krishnan said the know-your-customer (KYC) process for foreign portfolio investors would be streamlined, adding that SEBI had also become more open to the demand from private banks and other such regulated entities who wish to invest client monies through their FPI account. This is being very well received, and such entities are quite happy to furnish the break-up once a quarter as stipulated. Such market-friendly initiatives will be pivotal in accelerating foreign portfolio investor inflows into India.