India must liberalise markets further: US treasury secretary
Tuesday, 30 October 2007
MUMBAI, Oct 29 (AFP): US Treasury Secretary Henry Paulson today urged India's policy makers to avoid curbs on foreign investment into the financial markets as they could hurt efficiency and become ineffective.
"We understand that Indian officials are concerned that greater capital flows associated with a financial centre could add to inflationary pressures, destabilise domestic financial markets or add to exchange rate volatility," Paulson said at a seminar in Mumbai, India's financial hub.
But he said "administrative restrictions tend to inhibit efficiency and lose their effectiveness over time. I encourage India to continue to liberalise such restrictions."
India's market regulator last week sought to limit a surge in overseas investment in the Indian stock market by phasing out a system that allowed some investors such as hedge funds to buy shares anonymously.
The regulator said funds now have 18 months to register with Indian authorities to continue to be able to buy shares.
Foreign investors have helped drive a stock market boom in India, pumping in about 18 billion dollars this year alone, pushing the benchmark Sensex up by nearly 40 per cent over the same period.
"As recent experience in the region shows, administrative restrictions are blunt instruments and can have unintended consequences," Paulson told a gathering, which included Indian Finance Minister P. Chidambaram.
"We understand that Indian officials are concerned that greater capital flows associated with a financial centre could add to inflationary pressures, destabilise domestic financial markets or add to exchange rate volatility," Paulson said at a seminar in Mumbai, India's financial hub.
But he said "administrative restrictions tend to inhibit efficiency and lose their effectiveness over time. I encourage India to continue to liberalise such restrictions."
India's market regulator last week sought to limit a surge in overseas investment in the Indian stock market by phasing out a system that allowed some investors such as hedge funds to buy shares anonymously.
The regulator said funds now have 18 months to register with Indian authorities to continue to be able to buy shares.
Foreign investors have helped drive a stock market boom in India, pumping in about 18 billion dollars this year alone, pushing the benchmark Sensex up by nearly 40 per cent over the same period.
"As recent experience in the region shows, administrative restrictions are blunt instruments and can have unintended consequences," Paulson told a gathering, which included Indian Finance Minister P. Chidambaram.