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While employees and workers in other nations reap benefits of India’s buoyant equity market through heavy inflow by foreign portfolio investors and pension funds, the workers in India go home with the feeling of being left out.
Putting spokes Market regulator the Securities and Exchange Board of India, on Thursday expressed concern about organisations such as Employees’ Provident Fund Organisation not exercising their mandate and using their funds to participating in the financial markets, thereby preventing employees from getting attractive benefits. “Talking about reforms in the context of those who have the mandate and funds but who are not letting their funds being used in the financial markets, the biggest example is EPFO. It has the size of more than ₹7 lakh crore with annual accretion of more than ₹70,000 crore. But we are not getting pension money in the equities market, this is a big worry,” said UK Sinha, Chairman, SEBI.
Against over $34 billion worth of foreign portfolio inflow received in India between January 1 and September 15, a very big portion is from pension funds abroad.
This year, this foreign portfolio inflow is expected to touch an all-time high.
Speaking at a seminar on ‘Financing for Economic Growth: A Policy Roadmap’, Sinha maintained that even in a Communist nation or a country with 100 per cent capitalist orientation, workers’ pension money is invested in the securities market.
Nil forward movement “There is a provision from the Union Ministry of Finance that up to 15 per cent (of pension funds) can be invested in the equity market — 5 per cent direct and 10 per cent through mutual funds. Unfortunately, there has been no forward movement,” he said.
Calling for structural reform in this direction, he said the Indian market was becoming more and more dependent on foreign portfolio flows. “There has to be a counter balance to that. If that counter balance is not provided, we run the risk of exodus of money. We have to think in terms of allowing long-term pension money into the market,” he added.
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