FDI cap for stock exchanges soon

The finance ministry is likely to announce the FDI and FII investment limit in stock exchanges in a week's time, K P Krishnan, joint secretary, ministry of finance, said on the sidelines of the India Economic Summit.

On November 16, market regulator Sebi had notified that member brokers holding will be up to 49 per cent while public holding will be 51 per cent.

No single investor or an investor and people acting in concert can hold more than five per cent.

The finance ministry's guidelines for foreign holding in stock exchanges are likely to specify how much stake can be held through the FDI and FII route.

It is understood that foreign investment may be capped at 49 per cent and would be split between foreign direct investors and FIIs.

The stock exchanges will have to bring down a broker's stake below 51 per cent as part of the demutualisation process.

Speaking at a summit session on whether the next five-year plan can deliver for all, Planning Commission Deputy Chairman Montek Singh Ahluwalia said there was no political constraint on public sector companies to issue fresh equity and go public to raise money. "I know that disinvestment is a sensitive issue.

We will not privatise profit making public sector companies. However, it does not mean that you cannot sell equity in such firms to feed the money into the company rather than feed the Budget", he said.

Ahluwalia also said that 9 per cent GDP growth would not be feasible unless reforms were introduced in the financial and legal sector.

He also underlined the need of a healthy corporate bond market. Though raising the 26 per cent FDI cap in insurance was a sensitive subject, he said he was hopeful that other steps would be taken.

On the infrastructure deficit, Ahluwalia said the present pace of action would not generate the $100 billion extra funds over and above the $250 billion, as envisaged by the end of the next Plan period. "The total investment in infrastructure is 4.7 per cent of the GDP.

We want it to be 8 per cent by 2011-12. To achieve this, we need $350 billion. These rather than the Budget numbers are more important things", he added.