Luring Foreign Investments in the Indian infrastructure Sector
Posted in Finance Articles, Total Reads: 2804
, Published on 05 August 2011
India has been one of most powerful emerging economies. India has made inroads in all sectors varying from agriculture to IT to manufacturing. India has unique mix of companies which are equally important as they are either from the public sector or the private sector. According to estimates, at the rate with which India is progressing, the infrastructure requirements in India would soon cost more than $1 trillion. Thus the government has decided to be more open and allow more foreign investments and funds to the Indian capital markets and contribute to the infrastructure sector.
The government is looking forward to investments up to $10 billion or Rs45,000 crore from each qualified foreign investor (QFI), which would be invested in the Indian capital markets through mutual funds. The foreign investments would however be bound by the SEBI or Securities & Exchange Board of India, thus benefitting both India and the investors.
The guidelines laid down would help in creating instruments to raise long term debt for infrastructure of two types. Infrastructure debt funds (IDF) can be either an RBI regulated financial organization or it can be a SEBI regulated mutual fund in the Indian capital market. The IDF's would offer tremendous opportunity as well as flexibility to the investors as these investments would not only be safe and tradable, but they would also have an option of an early exit. On the other hand, long term investments in the Indian infrastructure market would boost India's progress as well.
QFI's would give more opportunity to the capital markets to grow and would also act as a protection against volatility. It would broaden the horizon for Indian infrastructure sector as there would be an increased flow of foreign investments. The overall scenario would boost the Indian stock market, have a positive impact on shares and also benefit the domestic mutual fund industry. However, strict rules and regulations must be implemented in order to weed out any dubious investors. This would not only safeguard Indian interests but would also increase the confidence in investors.
The other major benefit of foreign investments is that the Indian banking sector is unable to alone cope up with the investments required in the booming infrastructure industry. This is because the RBI regulates the loan limits and also exercises control over the asset-liability ratio. These new policies would lure overseas pension fund and insurance funds which would encourage them to invest through safer havens like NBFC's.
India is gradually becoming one of the most popular investment destinations in the world. With a stable economy, growing industry, diverse stock market portfolio and effective workforce, India is a land of opportunities for investors. And with new policies like IDF's, India aims to open its shores to more foreign investments in the infrastructure sector.
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