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India. India may loosen rules to allow foreign individual investors to trade in the country’s equities as part of moves to reform Asia’s third-largest economy, a report said on Monday.

A government panel exploring ways to increase foreign capital inflows has urged the Finance Ministry make it easier for foreigners — in particular those of Indian origin — to buy shares on the nation’s exchanges, a member of the panel told the Financial Times.

“The Finance Ministry has accepted the recommendations in principle as it wants to capitalize on India’s incredible growth by attracting more foreign investors,” said Ashvin Parekh, a partner at consulting firm Ernst & Young, who has been working on the project.

Foreign institutional investors were allowed into India 18 years ago. Foreign-owned brokers are common and trade directly on India’s exchanges.

But individual or retail investors are banned from doing so.

Parekh said the plan to open the market to retail investors abroad had been passed on to India’s market regulator and central bank, which would have to create a framework to protect foreigners’ interests.

The proposal comes as India’s exchanges are upgrading to lure fast computer-driven trading that accounts for a large part of the activity on US and European bourses.

It also comes as the government seeks to raise about $5 billion by selling minority holdings in state-owned groups, including Oil India and Coal India.

Foreign institutional investors have been keenly interested recently, pouring nearly $11 billion into Indian equities in the first seven months of this year, up from 7.45 billion rupees ($162 milllion) during the same period last year.

Analysts expect inflows for this year to exceed the $17 billion record hit in 2007 before the global financial crisis.
 

Agence France-Presse