Friday, December 15, 2006


An internal study by the Reserve Bank of India (RBI) is understood to have found out that most of the foreign exchange inflows into India from Non-Resident Indians (NRIs) and portfolio investments
are emanating from tax-haven countries. The study further aims at trailing the origin of the funds to the tax-haven countries. The findings are part of the overall study by the RBI to track the origin and utility of funds flowing into the country under the broad umbrella of Foreign Direct Investment (FDI). The study indicates the fact that the origin of funds is doubtful. Moreover, these are short-term investments being channelled to the Indian capital markets to earn capital gains exemption and not
for any productive purpose. In fact, some of the NRI inflows have also been used as portfolio investments for investing in the capital market. The portfolio investments in Indian capital market made to the unregistered route of participatory notes and hedge funds should be banned.


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