This refers to Rakesh Arora’s article “Indian economy stares at an avalanche” (April 23). If India wants to return to a near double-digit growth rate, it will need greater access to foreign investments to fund its acute infrastructure needs.
But investor confidence has been damaged since the proposals in the Finance Bill, 2012, were announced. The Indian financial sector remains heavily regulated with restrictions on the operations of foreign firms.
Unfortunately, many of these long-standing issues – such as the foreign direct investment cap in insurance – are not expected to be resolved quickly. Other such issues as the roadmap for foreign banks are moving forward, albeit very slowly.
But it is not all gloom. There have been some smaller but positive developments in the financial sector such as the government of India’s move to allow direct investment in the equity market by foreign pension funds, investors and trusts (January 2012) and its announcement in March’s Budget that this will be extended to the Indian corporate debt market.
But international investors – like the ones based in London – will need to see a more predictable business climate develop in order to improve confidence in the long term.
Stuart Fraser London
