India has lost competitiveness in key markets for stocks, rupee: report

New Delhi: India has lost competitiveness in key international markets for stocks and rupee due to adverse tax treatment of overseas investors as also bureaucratic and procedural issues, the government said on Wednesday.

The overseas market has developed into a significant competitor for India's two biggest markets - rupee and stocks, the pre-Budget Economic Survey 2013-14 said, adding that ten years ago, the global market was practically absent in both these fields.

"India has lost competitiveness in key markets," it said. Global market for the Indian rupee stood at USD 50.58 billion, while that for Nifty (National Stock Exchange's 50 bluechip stocks) was at USD 51.8 billion.

According to the survey, the overseas market has developed into a significant competitor for Indian currency, and in equities more than half of the position is now overseas. Moreover, active trading has developed at overseas avenues in both these markets. The survey attributes the loss of India's competitiveness in key international markets for stocks and rupee to adverse tax treatment for overseas investors, bureaucratic and procedural issues and capital control frictions against foreign investors.

Among other hurdles are technical mistakes in rules on position limits and margins, domestic markets not open at all hours and Indian markets being less developed than some competitors. The rise in share of overseas market is a major external impulse upon the Indian financial system.

However, it has a positive impact too, the survey said. "Global competition generates pressure on private players to become more efficient, which is a positive development," it added.