Sector caps on investments should be removed for NRIs: G P Hinduja

Written by PTI | London | Updated: Oct 19 2014, 00:44am hrs
Investments by Non-Resident Indians in India should be treated on par with resident Indians and sector caps applicable to foreign investors should be removed for NRIs, leading NRI entrepreneur G P Hinduja has said.

Hinduja, Co-Chairman of the Hinduja Group, said this in a note submitted to External Affairs Minister Sushma Swaraj yesterday at the Bentley Hotel here.

The note among other things suggested that the India should move to grant dual citizenship to the Indian diaspora.

"Investments by Non-Resident Indians in India should be treated on par with Resident Indians, and especially sector caps applicable to foreign investors should be removed for NRIs," Hinduja said.

"For example, NRIs are not permitted to hold more than 49 per cent shareholding in a defence sector - this restriction on foreign companies should be relaxed and removed for NRIs."

Hinduja noted that "an impediment to NRIs investing in India is the prohibition of Overseas Corporate Bodies (OCBs) controlled by NRIs. Many NRIs have their wealth tied up in corporations.

"The Government of India should allow OCBs to invest as long as proper disclosures are in place and 'Know Your Customer' information is suitably provided. Round tripping of money by resident Indians will be discouraged."

According to the note, the proposed merger of Overseas Citizenship of India (OCI) and Persons of Indian Origin (PIO) will give some relief to PIO cardholders.

The note said, "The Government of India should move to grant dual citizenship to the Indian diaspora."

Furthermore, the government should also allow Overseas and Non-Resident Indians to vote in general elections.

While inaugurating the two-day Regional Pravasi Bharatiya Divas at the Queen Elizabeth II Conference Centre here yesterday, Swaraj had said she would welcome suggestions from the NRIs and take necessary follow up actions.

Noting that India received foreign remittances worth USD 70 billion in 2013 from NRIs, Hinduja said: "The Government of India should launch an initiative to encourage the use of such NRI funds, rupee denominated to investment in social and physical infrastructure in India and ensure ease of legal, compliance and repatriation framework/procedures."

"The NRI fund should be professionally managed, with full transparency, under the auspices of the Finance Ministry, with a mandate to generate returns at least at par with NRI deposits.

"Further incentives in the form of tax exemption, subsidised land costs, concessional loans if required, export incentives, preferential market access should be made available to projects which is being financed by the NRI fund."

Hinduja said that the proposed NRI fund for Ganga might be designed on these lines. He said the current Portfolio Investment Scheme (PIS) is quite cumbersome in respect of NRIs wanting to invest in equities.

"As long as target Investment Company can ensure the source of funds is non-resident (based, if possible on self- declaration) other processes may then be made simpler," he said.

He said, "The Foreign Currency Non-Resident Scheme (FCNR) tenure limit of one year should be reduced to three months. India is losing a large source of funds which are short term in nature. The Reserve Bank of India may feel this increases volatility but to the contrary this will bring in large capital inflows regularly and mitigate that concern. Moreover, the retail nature will ensure smoothening of any volatility."

The relaxation of the negative list of industries for NRI investments will help, especially in agriculture, he said.

The corporation of agriculture is somewhat controversial, but just like NRI have invested in agriculture in Africa, India will also benefit from a controlled relaxation.

For instance, the Government of India could insist on certain per cent crop production in one year to avoid large tracts being left by NRI landlords as untilled.

In another recommendation, Hinduja said the Government of India and Ministerial and other official visits overseas should include in the delegation prominent NRIs from the country visited: NRIs can contribute enormously with a good inside knowledge of their host countries.

Furthermore, the Government of India has an enormous resource with the numerous Industrial forums, such as FICCI, the CII and others, he said.

Hinduja, who also attended the RPBD, noted that the measures mentioned in the paper would lead to greater flow and confidence of the NRI community to support and invest in India.