August 23, 2019 / 1:02 PM / 3 months ago

India to roll back higher surcharge on foreign portfolio investors

BENGALURU (Reuters) - The Indian government announced measures on Friday to revive economic growth and markets including the withdrawal of higher taxes for foreign portfolio investors (FPIs) and said it would release funds for bank recapitalization upfront.

Finance Minister Nirmala Sitharaman told reporters the government had decided to withdraw the surcharge on FPIs which she had unveiled in her budget for the fiscal year ending March 2020.

COMMENTARY

MADHAVI ARORA, LEAD ECONOMIST AT EDELWEISS SECURITIES, MUMBAI

“Policymakers emphasized that they are keeping a watch on the wealth creators. In this context, the withdrawal of FPI and DII enhanced surcharge of long- and short-term gains are welcome move and would have a marginal fiscal impact of 14 billion rupees.”

“The move to release 700 billion rupees of funds upfront to recapitalize public sector banks rather than phase out funds through the year will have a better multiplier effect for credit expansion.

“The government also re-emphasized that it is consulting with banks to encourage them to link their loan rates to the external benchmark, something that even the RBI had emphasized in the August policy.”

SANDIP SABHARWAL, LOCAL FUND MANAGER, MUMBAI

“Removal of surcharge for all investors as well as upfront funding of PSU Banks is good. Measures on the auto sector are incrementally positive. However, we need to see if the GST council also moves on this.”

OMKESHWAR SINGH, HEAD OF RANK MF, SAMCO SECURITIES, MUMBAI

“This was a much needed, detailed press conference amid different voices. The (surcharge) rollback will have a positive impact, and also shows that the government does listen to the industry and take appropriate corrective measures.”

RUSMIK OZA, HEAD OF FUNDAMENTAL RESEARCH, KOTAK SECURITIES, MUMBAI

“The withdrawal of enhanced surcharge on FPI is a big positive for Indian markets as it could reverse the outflows seen since post-budget. It should also help INR appreciation. Overall, a good sentiment booster for the Indian economy.”

AISHVARYA DADHEECH, FUND MANAGER, AMBIT ASSET MANAGEMENT, MUMBAI

“(In the) last one-and-a-half months, it was adverse sentiment that led to intense drawdown in the broader market. We believe this move will be taken very positively by the street as the overhang of an increase in tax incidence has been removed. It will also send the right signals to global market participants who are infused with ample liquidity.”

Reporting by Chris Thomas, Sachin Ravikumar, Derek Francis and Nivedita Bhattacharjee in Bengaluru; Editing by Subhranshu Sahu

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