India will allow greater capital account convertibility in financial special economic zones (SEZs). The first such notified SEZ to benefit from the reform will be the Gujarat International Finance Tec-City (GIFT City), coming up near Ahmedabad, said Union Commerce Secretary Rajeev Kher. “The Securities and Exchange Board of India (SEBI) and the Reserve Bank of India are looking at drafting the regulations that will make greater capital account convertibility possible in notified financial SEZs...GIFT will be the first to benefit,” Mr. Kher told reporters.
It will be possible for the corporate sector to raise foreign currency loans in such SEZs the way they do overseas right now, he said giving an example.
The proposal is based on the Percy Mistry Committee report in 2007, which had recommended a slew of reforms to enable India to set up financial districts on the lines of those in London and New York. The financial SEZs are also aimed at attracting to India the huge volumes of global trading in rupee and the National Stock Exchange’s index Nifty that right now take place offshore in locations such as Singapore, London and Dubai. On Sunday, SEBI had set up some of the norms under its purview required for giving shape to International Financial Service Centre (IFSC) such as GIFT. The norms aim to ease the setting up of stock exchanges and capital market infrastructure in such centres.
Responding to questions about the slump in India’s export performance — de-growth of 15 per cent in February, as per the latest available data extending January’s fall of 11.12 per cent — Mr. Kher said it was due to the sharp contraction in global demand. “India’s largest export destinations are experiencing a slowdown as a result the demand for India’s exports has taken a hit,” Mr. Kher said.
The sharp decline in exports growth has put out of reach the $340-billion target India had set for 2014-15.
