The Indian government has unveiled its most ambitious target for public share sales so far, looking to capitalise on the robust domestic capital markets to cut its annual deficit. In last week’s federal Budget, Finance Minister Arun Jaitley set a 725 billion rupees (USD 10.76 billion) target for divestment in the 12 months from April 1, up from a revised 455 billion rupees goal in the current fiscal year.
- The government intends to raise 110 billion rupees from the listing of state-owned insurance companies, 465 billion rupees from the sale of stakes in state-owned companies on local stock exchanges and 150 billion rupees from strategic sales in 2017-18.
- Analysts and investors welcomed the Budget, sending stocks and bonds broadly higher on promises of tax cuts and a lower fiscal deficit. However, the statement makes it clear that the capital markets will play a far greater role in the country’s finances than in previous years.
Reforms in the FDI policy
With more than 90 per cent of the total FDI inflows under the automatic route and successful implementation of e-filing and online processing of FDI applications by the FIPB, the government has decided to abolish FIPB in FY2017-18 for which a road map is expected to be provided shortly. Further liberalisation of FDI policy is on cards.
Other policy proposals
- The registration process of financial market intermediaries such as mutual funds, brokers, portfolio managers, etc. to be made fully online by SEBI.
- Registration, opening of bank and demat accounts, and issue of PAN for FPIs to be taken care by a common application form and put in place jointly by SEBI, RBI and CBDT.
- Individual demat accounts to be linked with Aadhar.
- An expert committee to be constituted to study and promote creation of an operational and legal framework to integrate spot market and derivatives market for commodities trading. E-National Agricultural Market would be an integral part of such framework.
- The commodities and securities derivative markets to be further integrated by integrating the participants, brokers, and operational frameworks.
- The Arbitration and Conciliation Act 1996 to be amended to streamline institutional arrangements for resolution of disputes in infrastructure related construction contracts, PPP and public utility contracts.
- Towards cyber security, a Computer Emergency Response Team for Financial Sector (CERTFin) to be established to work with all financial sector regulators and other stakeholders towards safeguarding the integrity and stability of financial sector.
- Systemically important NBFCs RBI regulated and above a certain net worth, to be categorised as QIBs and can participate in IPOs with specifically earmarked allocations.
- Listing and trading of security receipts issued by a Securitisation Company or a Reconstruction Company under the SARFAESI Act to be permitted on registered stock exchanges.
- Existing Board for Regulation and Supervision of Payment and Settlement Systems to be replaced by Payments Regulatory Board in the RBI. Further, the government will undertake a comprehensive review of Payment and Settlement Systems Act, 2007 and bring appropriate reform in the digital payment eco system.
- The RBI Act, 1934 amended to permit issuance of electoral bonds by authorised scheduled banks.
- Fund allocation for incentive schemes such as M-SIPS and EDF exponentially increased to Rs 745 crore in FY2017-18.
- Ease of doing business by rationalisation and digitalisation of processes. Central Excise/Service tax assessees to be allowed to use digital signed invoices and maintain record electronically.
- Online central excise and service tax registration to be done in 2 working days.
- Domestic Transfer Pricing threshold limit increased from Rs. 5 cr to Rs. 20 cr.