Indian Fiscal Budget 1997-98: Full Text


Foreign Investment & Capital Market Foreign Investment

  1. Foreign Institutional Investors (FIIs) continue to repose great confidence in India. Net FII investment in India is now over US$ 7 billion. During the course of this year I have expanded the opportunities for such investments. I propose to take one more step at the instance of Indian companies. The limit of aggregate investment in a company by FIIs, NRIs and NRI-OCBs is now 24%. I propose to allow companies to raise this limit to 30%, subject to the condition that the Board of Directors of the company approves the limit and the general body of the company passes a special resolution in this behalf.

  2. Venture capital funds are important vehicles for stimulating investments in new ventures. Under the present guidelines they can invest upto 5% of their corpus in the equity of any single company. This is unduly restrictive. The limit is being increased to 20%.

    Capital Market

  3. Over 20 million Indians have invested their savings in the capital market. The establishment of the first Depository was an important step taken to bring the Indian capital market upto world standards and to protect the interests of the investors. SEBI was asked to suggest more measures. The committee appointed by me to draft a new Companies Bill has also made valuable suggestions. After considering these suggestions, I propose to accept five recommendations:
    • The principle of buy-back of shares by companies subject to certain conditions will be introduced in the Companies Act;
    • The provisions of Sections 370 and 372 of the Companies Act will be merged and an overall ceiling of 60% will be kept for intercorporate investment and loans;
    • The Companies Act will be amended to provide for nomination facilities for holders of securities;
    • Companies raising funds from the capital market will be required to give an annual statement disclosing the end-use of such funds; and
    • One time permission will be given to stockbrokers to corporatise their businesses without attracting tax on capital gains, which will be exempted.

  4. I am of the firm view that markets will prosper when economic growth continues to be strong, the fiscal deficit is reduced, interest rates decline and investors are reassured that their interests are secure.

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