India, UK explore investment cooperation in several areas
Expeditiously finalising a bilateral investment treaty, an important part of a proposed comprehensive FTA, are among the areas
India and the UK are exploring greater investment cooperation in several areas, including direct listing of Indian firms in the London Stock Exchange (LSE), facilitating British pension funds to invest in India, collaborating in infra projects, and expeditiously finalising a bilateral investment treaty which is an important part of a proposed comprehensive free trade agreement (FTA), according to the finance ministers of the two countries.
After the conclusion of the 12th India-UK Economic and Financial Dialogue (EFD), UK’s Chancellor of the Exchequer Jeremy Hunt said India has confirmed that it will “explore” LSE as an international destination for the direct listing of Indian companies, and also unveiled a new pension and insurance partnership.
“We can really support each other’s plans to strengthen our relationship,” Hunt said, adding that the next stage is a comprehensive FTA and a bilateral investment treaty (BIT) on which discussions are ongoing. The 12th EFD between the countries was co-chaired by Nirmala Sitharaman and Hunt.
Speaking on the occasion, finance minister Sitharaman said there are ample opportunities for both nations to collaborate on frameworks for secure and inclusive financial intermediation. The success of the UK-India green growth equity fund is the testimony to the efficacy of public-private partnership in channelling large-scale sustainable finance, she added.
The two partners continue to explore “new avenues of investments” in “shared priority” sectors, she said, announcing the launch of the a UK-India Infrastructure Financing Bridge. “It is a collaborative venture co-led by NITI Aayog and the City of London Cooperation, aimed at harnessing collective expertise in planning and implementing major infrastructure projects,” she said.
“We are highly encouraged by intensified collaborations between India and the UK in the area of financial services. The UK expressed willingness to further extend its footprints in the GIFT City… [to] foster robust fintech partnership,” Sitharaman added.
Talk of Indian companies listing directly in foreign bourses had first picked up steam in May 2020. The government, while announcing a relief and revival package after the Covid-19 pandemic, proposed to allow local firms to list on overseas exchanges to raise money. However, the proposal could not be implemented due to concerns over losing regulatory control over such firms, besides issues of money laundering and tax evasions, experts said.
At present, Indian companies cannot list directly on foreign bourses but can access overseas equity markets through depository receipts such as Global Depository Receipts or American Depository Receipts. They can also list on foreign exchanges by listing their debt securities such as foreign currency convertible bonds and masala bonds.
This July, Sitharaman hinted at a plan to revive the proposal. “A direct listing of securities by domestic companies will now be permissible in foreign jurisdictions. I’m also pleased to announce that the government has taken a decision to enable direct listing of listed and unlisted companies on the IFSC exchange,” a July 28 report in PTI quoting Sitharaman said.
On Monday, in reference to the Covid-19 pandemic and adverse geopolitical developments in Europe, Sitharaman said the two countries withstood the unprecedented challenge through innovations and resilience, and emerged stronger through strategic reforms by revitalising the financial landscape. “We remain committed to collaborate, deliberate and innovate to navigate the challenges and seize the opportunities that lie ahead for both nations,” she said.
“I’m pleased with the tangible progress achieved through the India-UK financial partnership,” Sitharaman said, appreciating efforts of co-chairs – Uday Kotak and Bill Winters for sharing their “professional expertise and insights” to strengthen India’s financial sector with emerging technology such as artificial intelligence (AI) and machine learning, redefining financial services, and informing India’s new Digital Personal Data Protection Act.
There have ample opportunities for both nations to collaborate on frameworks for secure and inclusive financial intermediation, and the success of the UK-India green growth equity fund is the testimony to the efficacy of public-private partnership in channelling large-scale sustainable finance, she said.
Nilaya Varma, co-founder and CEO of consultancy firm Primus Partners, said: “India has decided to consider the option of allowing firms to be list directly on London Stock Exchange. The decision is in line with the stated aim of the finance ministry to explore access to 10 permissible jurisdictions which are having strong anti-money laundering rules using GIFT City as the initial platform.”
“The key drivers for this move have been the huge capital requirement, especially private investment required to achieve GDP growth rate of 8%, and the increasing maturity of Indian financial system to handle cross-border capital flows. The record foreign exchange reserves are also giving the government the confidence to explore opening up the financial markets,” Verma added.