An Indian ten rupee banknote and U.S. one-hundred dollar banknotes are arranged for a photograph in Mumbai. (Photographer: Dhiraj Singh/Bloomberg)

Union Budget: Government To Formulate Separate Policy For Hybrid Instruments

The government will formulate a separate policy for hybrid instruments as they are more suitable for attracting foreign investments in several niche areas, Finance Minister Arun Jaitley said today.

Hybrid instruments include optionally convertible or partially convertible debentures, Foreign Currency Convertible Bonds, which are intrinsically debt-instruments.

They also give the holders an option to convert into equity at a later date.

“Hybrid instruments are suitable for attracting foreign investments in several niche areas, especially for the startups and venture capital firms. The government will evolve a separate policy for the hybrid instruments,” he said while presenting the Union Budget 2018-19.

Besides equity investment, foreign direct investment capital means fully and compulsorily convertible preference shares, debentures and warrants.

The minister also announced bringing out a coherent and integrated Outward Direct Investment policy. “ODI from India has grown to $15 billion per annum. The government will review existing guidelines and processes and bring out a coherent and integrated ODI policy,” he added.

The government has taken several steps to attract FDI into the country.

Jaitley said that as a result of the reforms undertaken by the government, FDI has gone up and measures taken have made it much easier to do business in India.

On Jan. 10, the Centre allowed foreign airlines to buy up to 49 percent stake in Air India and eased FDI rules for several sectors including single brand retail and construction. This was the second major liberalisation in FDI policy by the government in one go after major changes effected in June 2016.

FDI during the April-September period in the current fiscal increased by 17 percent to $25.35 billion. India has attracted $43.47 billion FDI in 2016-17, as against $40 billion in 2015-16.