It is not feasible for FPIs to change structure to invest in India: Nandita Parker, Karma Capital | The Economic Times

July 31, 2019 The Economic Times Link…


There is no middle ground. The surcharge must be removed. Since it was done inadvertently and not by design, I do not see why it should remain going forward. We are looking forward to explaining to FM why the trust structure cannot be converted into corporate structures, why it is not advisable for us to convert and the real issues that FPIs face in terms of taxation, says Nandita Parker, Owner, Karma Capital. Excerpts from an interview with ETNOW.


Do you feel finance minister’s latest comment saying that she was willing to discuss the taxation issue with FPIs, could be seen as an olive branch from the government side?
Yes, it is a very welcome statement from the government and we are looking forward to discussing the issues and why the trust structure cannot be converted into corporate structures, why it is not advisable for us to convert and the real issues that FPIs face when they invest in India in terms of taxation .

The taxation has created a very high friction cost for the management of funds especially open-ended funds and these are some of the issues we are going to discuss. Let us remember that these trust structures have been set up globally in the United States for mutual funds, pension funds and large institutions. India is a very small percentage of global allocation and it would not make a lot of sense and nor will it be feasible for these funds to change their structures in order to invest in India.


Also, these funds are not taxed on their capital gains in other countries of the world. India is the only tax regime where foreigners and foreign residents are being taxed on their capital gains on securities that they buy and sell in India and that is making India quite uncompetitive. We hope that when we speak to the finance ministry, they will hear us out and they will see how much harm this is doing to foreign portfolio inflows in India. Since February 2018, FPI inflows into India have really diminished and from this budget of July 5th, there has been a very sharp daily outflows of FPI money and what is really disconcerting.


This is in the backdrop of a decent global market where the United States stock market is still doing extremely well. You have a falling interest rates environment globally. This should be an environment where India should be able to attract much larger inflows and especially if the government is targeting a $5-trillion economy in five years, India needs to get a much higher share of foreign portfolio inflows.


It should start thinking about how to target 30 billion types of inflows annually and a roadmap must be created for that to happen and that should start right away because we are behind the curve. I am very, very hopeful that with the kind of mandate this government has, they will not hesitate and will put full force of their minds to it.

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