Overseas investors pull out Rs 1 trillion from India

June 11, 2012

overseas

New Delhi, June 11: Rich overseas entities, investing in Indian markets through 'participatory notes' (P-notes/PNs), are estimated to have pulled out over Rs 1 lakh crore (about USD 20 billion) in less than three months on fears of getting caught in the government's taxation net and its black money trail.

As a result, the quantum of money invested through these PNs has hit its rock-bottom levels of just about 10 per cent of total FII (foreign institutional investment) holdings -- which used to be more than 50 per cent a few years ago.

The participatory notes (PNs) allow foreign HNIs (high networth individuals) and other rich investors to invest in India through already-registered FIIs, while saving on time and costs associated with direct registrations.

The flight of PN investments began late in March after the government in its union budget proposed new taxation regime of General Anti-Avoidance Rule (GAAR) and certain retrospective amendments for taxing offshore transactions.

Sources said that PN investors have already pulled out close to Rs 1 lakh crore (about USD 20 billion) from Indian equity and debt markets, while they might have decided against putting in fresh investments worth at least Rs 50,000 crore ever since the new tax policy was proposed.

While GAAR has been deferred by a year, the tax proposals for offshore transactions could apply to FIIs as well.

It is feared that the new taxes could lead to heavy tax burden for the foreign investors investing through tax-friendly jurisdictions like Mauritius. Most of the overseas entities route their investments into India through such places to take benefit of their tax-friendly regimes.

There are apprehensions that FIIs could be forced to pass on their tax liabilities to their PN clients, thus adversely impacting their overall returns on investment.

Many hedge funds and ultra-rich investors from abroad prefer PNs, which are sold by India-registered FIIs, as it allows them maximise the returns through savings on costs and rigmarole of various regulatory processes.

As per the latest data available with market regulator Sebi, the total value of PNs in Indian markets stood at about Rs 1,30,012 crore (about USD 25 billion) at the end of April 2012, down from Rs 1,83,151 crore at the end of February and Rs 1,65,832 crore as on March 31, 2012.

This figure was on a sharp uptrend this year till middle of March, but started declining sharply after tax proposals came to be known. While the mid-month figures are not shared by Sebi, the industry sources said that the total value of PNs are estimated to have reached near Rs two trillion (about USD 40 billion), before it started sliding in late March.

Sources said that the total value of PNs is estimated to have fallen further to near Rs one lakh crore level (about USD 15 billion) currently, marking a fall of nearly same amount from its late-March peak.

The share of PNs in total FII holding stood at 16.4 per cent in February, but fell to 11.4 per cent by April. It has now further fallen to near 10 per cent level, sources said, while adding that most of the FII outflow currently taking place is in the PN accounts.

The PNs have been accounting for mostly 15-20 per cent of total FII holdings in India since 2009, while it used to much higher in the range of 25-40 per cent in 2008. However, it was as high as over 50 per cent at the peak of Indian stock market bull run during a few months in 2007.

In addition to the new taxation proposals, the government's recent white paper on Black Money has added to the flight of PN investments from India, sources said.

The white paper, tabled by the Parliament on May 21, said that PNs were being used by Indian citizens to re-invest the black money in the country.

"Investment in the Indian stock market through PNs is another way in which the black money generated by Indians is re-invested in India," it said.

Participatory note is a derivative instrument issued in foreign jurisdictions, by a foreign institutional investor (FII) or its sub-accounts against underlying Indian securities.

"... through the instrument of PNs, investment can be made in the Indian securities market by those investors who do not wish to be regulated by Indian regulators due to a variety of reasons," the white paper noted.

The reasons could include the desire of investors to keep their identity anonymous, which is possible also for the reason that PNs/ODIs can be freely traded and easily transferred without disclosing the identity of the actual beneficiaries, it added.

As per the white paper, since PNs are issued from offshore financial centres (OFCs) such as the Cayman Islands, British Virgin Islands, Switzerland, and Luxembourg, it is possible to hide the identity of the ultimate beneficiaries through multiple layers.

Amid rising concerns that some of the money coming through PNs could be unaccounted wealth under the of FII investment, market regulator Sebi has already taken various measures to ensure that these instruments are not used for black money laundering. It was due to the steps taken by Sebi that the PNs' share in total FII holding had previously fallen from over 50 per cent to 15-20 per cent.

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Agencies
June 28,2020

New Delhi, Jun 28: Home Minister Amit Shah on Sunday targeted former Congress President Rahul Gandhi, saying he was indulging in "shallow-minded" politics and making statements that make Pakistan and China happy when soldiers are fighting a spirited battle.

Shah said the government is ready for a discussion in Parliament about the situation from 1962 (when India-China war took place) and it is sad that a former president of a party making statements, which are being celebrated in Pakistan and China.

The Home Minister's comments came during an interview with ANI when he was asked about Rahul's "Surrender (Prime Minister Narendra) Modi" remarks while criticising the BJP-led government on India-China border row.

Rahul has been consistent in his criticism of the government on the handling of both Covid-19 situation and India-China border row, which escalated into a "violent face-off" earlier this month in which 20 Indian soldiers were killed.

"Let there be a robust debate in Parliament. Let us have one. Let us discuss from 1962. Nobody is scared of debate. But one should not make a statement that makes Pakistan and China happy when the soldiers are fighting a spirited battle and the government is taking strong steps," he said.

Asked whether India can handle the anti-India propaganda unleashed by Rahul's 'Surrender Modi' hashtag, he said the government is capable of handling it but it is a matter of introspection for the former Congress president and his party that their remarks are being used against the country.

Modi's remarks at an all-party meeting that no one has intruded into Indian territory triggered a controversy with a section arguing that it went against the previous statement of External Affairs Minister S Jaishankar.

Claiming that he could not advise Rahul as it is Congress' job to do so, he said the government has fought Covid-19 well but some people have a twisted way of seeing things. He said India fought well against Covid-19 and the statistics will speak for itself as it is much better compared to the world.

Shah said under Modi's leadership, India is going to win both the battles -- Covid-19 and India-China border row.

The Home Minister also refused to be drawn into a question on whether Chinese soldiers are holding on to Indian territory on the border at present, saying the government is doing enough to address border row with China.

"I don't want to do anything that goes against my primary aim of this interview (to highlight the steps taken to fight Covid-19 pandemic in Delhi) and create headlines that keep citizens further in fear," Shah said.

When pointed out that people are also in panic due to the border situation, he said the government has taken steps to address the situation and at an appropriate time he would make comments, if needed.

Asked about his tweets on Emergency, which was targeted by Congress asking whether there is democracy in the BJP, he countered it saying that BJP has presidents L K Advani followed by Rajnath Singh, Nitin Gadkari, Rajnath again, himself and now J P Nadda.

"After Indira-ji, was there any Congress President from outside Gandhi family? What democracy do they talk about? I did not do any politics during Covid-19. You look at my tweets of the past 10 years. Every June 25, I give a statement," he said.

"Emergency should be remembered by people as it attacked the roots of our democracy. No one should ever forget it. There should be awareness about it. It is not about a party but about the attack on the country's democracy," he said.

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News Network
June 3,2020

Jun 3: Emphasising that airlines are clearly the safest mode of transportation, IndiGo CEO Ronojoy Dutta on Tuesday said there is no evidence yet of coronavirus infection getting transmitted among passengers onboard an aeroplane.

His comments against the backdrop of instances of some passengers, who had taken flights after resumption of domestic air services on May 25, testing positive for coronavirus.

"Those people had the virus before they got on to the aeroplane. What is noteworthy is that they have done the tracing after that. There is no evidence of transmission onboard there... that is a very encouraging sign on the safety of airline travel," he said during an earnings call.

According to him, airlines are clearly the safest mode of transportation and there is no evidence yet of contamination on an aircraft.

"You can come in contaminated but so far there is no evidence of passing it on to a fellow passenger," he noted.

Amid concerns over the coronavirus pandemic, aviation regulator DGCA has asked airlines to ensure that to the extent possible, middle seat in flights should be kept empty.

In this regard, Dutta said the airline would keep the middle seat empty wherever it can and "where we have to fill the middle seat, we will have the extra protective gown".

To a query about possible hedging of fuel prices, he said it would be a dumb idea and that airlines adjust to ups and downs in fuel prices.

"I can't overemphasise what a dumb idea it will be for an airline to hedge fuel prices. I looked at it from different angles and it is not a good idea... we looked at hedging and we talked about it at the board level and we said no," he noted.

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News Network
May 27,2020

Muzaffarpur, May 27: A toddler's vain attempt to wake up his dead mother from eternal sleep on a railway platform in Bihar's Muzaffarpur on Wednesday presented the most poignant picture of the massive migrant tragedy unfolding across several states.

A video tweeted by Sanjay Yadav, an aide to RJD leader Tejashwi Yadav, shows the child walking unsteadily up to his mother's body, tugging at the blanket placed over her, and when failing to wake her up, covering his own head with it.

As the mother still lay still, he wobbles away from her, announcements continuing in the background about the arrival and departure of trains that would bring in tens of thousands of people in a rush to get away from hunger and hardship they face in large cities that could sustain them no more.

"This small child doesn't know that the bedsheet with which he is playing is the shroud of his mother who has gone into eternal sleep. This mother died of hunger and thirst after being on a train for four days. Who is responsible for these deaths on trains? Shouldn't the opposition ask uncomfortable questions?" tweeted Yadav.

However, police had a different story to tell.

Ramakant Upadhyay, the Dy SP of the Government Railway Police in Muzaffarpur, said the incident occurred on May 25 when the migrant woman was on way to Muzaffarpur from Ahmedabad by a Shramik Special train.

He told reporters the woman, who was accompanied by her sister and brother-in-law, had died on the Madhubani bound train.

"My sister-in-law died suddenly on the train. We did not face any problem getting food or water," the officer said, quoting the deceased's brother-in-law who he did not name.

He said on getting information, poice brought down the body and sent it for postmortem.

Citing the brother-in-law of the deceased, Upadhyay said she was aged 35 years and was undergoing treatment for "some disease" for the last one year in Ahmedabad. "She was also mentally unstable," he said.

When persistently queried about the cause of death, he said,"Only doctors can tell".

A massive exodus of migrant workers is on in several parts of the country, unprecedented in magnitude since Partition.

The humanitarian crisis still unfolding on highways and railway platforms has shone light on disturbing tales of entire families walking hundreds of kilometres with little children on foot in a seemingly endless march to escape hunger.

People have been found travelling on trucks and in the hollow of concrete mixing plants, and in many cases, dying from hunger and exhaustion before reaching their destinations.

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