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23 Aug 2019: The Hindu Editorial Analysis

1) On regulations for foreign investors: New norms

  • Foreign investors who have been fleeing (fly away from) the country since the Union budget presented early last month have something to cheer about finally. On Wednesday, the Securities and Exchange Board of India (SEBI), based on the recommendations of the H.R. Khan committee, eased several regulatory restrictions that are likely to make life easier for foreign portfolio investors (FPIs).
  • Among a slew of measures, the financial markets regulator has simplified the registration process for FPIs by doing away with the broad-based eligibility criteria, which required a minimum of at least 20 investors in a foreign fund, and certain documentary requirements.
  • FPIs can now also engage in the off-market sale of their shares with fewer restrictions. Further, SEBI has allowed entities registered at an IFSC (international financial services center) to be automatically classified as FPIs. This might help foreign investors bypass some of the restrictions.
  • Mutual funds with offshore funds too can invest in India as FPIs to avail certain tax benefits now. Central banks that are not members of the Bank of International Settlements are also allowed to register as FPIs and invest in the country under the new norms.
  • Smart cities, along with other urban development agencies, will now be allowed to issue municipal bonds to raise funds for development. These measures to cut red tape will help lower the regulatory burden on investors, globalize India’s financial markets, and aid the growth of the broader economy by increasing access to growth capital.
  • It is not immediately clear whether SEBI’s move on Wednesday was motivated by the recent flow of funds out of India’s capital markets. Capital in excess of ₹20,000 crore has left Indian shores in the last few weeks after Finance Minister Nirmala Sitharaman’s budget decision to increase taxes on FPIs.

  • While the steps taken by policymakers to make amends for their previous policy errors are obviously welcome, they should not deflect attention from the larger and persistent issue of overreach by the government against investors. In a world of globalized capital markets, where many nimble (quick) emerging markets compete to attract capital from the developed world, India cannot afford to be seen as flip-flopping on its commitments.
  • Policymakers were clearly under pressure to do something to allay (ease) the fears of foreign investors, so the timing of SEBI’s move is no surprise. But given the broader trend of capital flowing out of emerging markets across the world, it remains to be seen whether SEBI’s present move will yield immediate benefits. Even if it f­ails to do so, the move will still help Indian markets become more attractive to foreign investors in the long-run.


2) On Assam NRC: Internal affairs

  • External Affairs Minister S. Jaishankar’s statement in Dhaka on Tuesday that the soon-to-be-published National Register of Citizens (NRC) in Assam is India’s internal matter lets Bangladesh off the hook (blame) as far as a possible return of those who don’t find their names in the NRC is concerned.
  • The Supreme Court has repeatedly asked the Centre to ascertain from Bangladesh whether it would accept those persons, who might be declared foreigners after the NRC exercise is completed in Assam. In fact, the Supreme Court has had occasion to say that the Centre had not engaged Bangladesh in a substantive (essential) dialogue on the issue.

  • By stating that the NRC is India’s internal matter, the External Affairs Minister has conceded (declared) to Bangladesh a point that Dhaka has repeatedly made — that the 40 lakh-odd people who don’t figure in the draft NRC lists are not its citizens and it is not responsible for them. In fact, Bangladesh has never accepted that any of its citizens ever illegally entered Indian territory.
  • Other than the cryptic (deep) remark about the NRC being an internal matter for India, The Daily Star newspaper quoted the Bangladeshi Foreign Minister A.K. Abdul Momen as saying that Mr. Jaishankar had conveyed to him not to worry about the NRC issue.
  • Bangladesh could well be satisfied with New Delhi’s position on the NRC, but Indians are none the wiser about what the Centre plans to do with the lakhs of people — Hindus and Muslims — who are likely to find themselves missing from the Register when it is finally published on August 31.
  • The BJP has long promised that it will deport all illegally resident Bangladeshis from Assam and the rest of India, a view that it has articulated time and again over the years. But this position doesn’t tally with what Mr. Jaishankar told his Bangladeshi counterpart.
  • The party has simultaneously promised that all non-Muslims, whose names don’t figure in the NRC, will be given citizenship rights by amending the law. Other than this, there is no clarity on what the government plans to do with the lakhs of people likely to be rendered stateless after the NRC exercise is completed.
  • Though these persons would have access to foreigners’ tribunals and the courts of the country, the Centre and the Supreme Court should have had a plan in place about how they will deal with the impending humanitarian crisis in Assam.
  • With Bangladesh out of the picture, the government should clarify its post-NRC plans. The government would also do well to treat all communities who don’t figure in the NRC in a non-discriminatory manner.
  • Many of the affected are abjectly poor people, with little or no understanding of how the NRC process works and entered this country in the hope of a better future for themselves and their children. It is the duty of the Government of India and the Supreme Court to ensure that these individuals are treated with dignity.

Source: The Hindu, Google Images