June 1, 2021

The investor considers the products and services that they use daily. It could be anything ranging from shopping on Amazon to streaming movies on OTT platforms like Netflix to the most common, searching for things on Google. Many of these businesses are based outside of India and do not trade on Indian stock exchanges. Why should the 21st Century Investor invest in such global giants?

In the early 1960s, the advantages of foreign diversification were empirically illustrated in financial literature. A few empirical studies have shown that Investors may reduce the chance of their portfolio returns at a significant level of projected return by diversifying through countries whose business cycles were not ideally aligned. We are all well aware that the top Multinationals, Best performing, and High yielding companies also change regularly.

As a result, concentrating all of one’s savings in a single area or asset class is not an effective idea. Another perspective is to profit from the weakening currency. As a result, having a geographically diversified portfolio is a Smart and Sound strategy.

Strategic investment is a craft, and as investors become more knowledgeable of the benefits of equity investing, they are increasingly looking to invest in businesses headquartered in other countries. With most countries’ economies improving, Indian institutional investors are diversifying and broadening their investment horizons to benefit from massive returns on global stock markets.

GLOBAL INVESTMENT OPTIONS

 MUTUAL FUNDS 

This is most likely the most effective and relatively simpler way for investors to gain foreign exposure at a low-cost option. Many Indian fund houses offer such overseas equity investment schemes. For example, a well-known fund house provides index funds that monitor and tracks Nasdaq 100 indices in the United States. Their taxation is almost the same as that of debt funds in India, which means that someone who retains for more than three years is taxed at 20% with indexation.

Few investors may be resistant to global diversification, believing that today’s world is so intertwined that foreign investments may overlap domestic ones. However, this is not the case, since businesses prefer to behave in ways that are dictated by the situation in their home country. They are more likely to respond to local economic and geopolitical issues than to events occurring beyond their boundaries.

LIBERALISED REMITTANCE SCHEME ROUTE

Investors can do so by sending money abroad via the Reserve Bank of India’s Liberalized Remittance Scheme (LRS), which has an annual cap of $250,000 (Approx. 1.8 Cr). The LRS cap expands the range of stocks and funds available to an investor beyond the small selection offered by Indian MUTUAL FUNDs. Transferring capital overseas, on the other hand, is costly as it requires more paperwork, and makes tax filing more difficult for Indian investors.

Besides that, foreign investment takes place in the shadow of official disapproval, particularly when done via the LRS pathway. Aside from the newly implemented TCS, foreign contributions must be registered annually under Schedule FA of the Income Tax returns, and omissions will result in the investor is subject to India’s strict black money laws.

Furthermore, foreign nations such as the United States collect their withholding taxes on dividends, which must be demanded back from India under the Double Taxation Avoidance Treaty (DTAA), which adds an extra layer of paperwork to the process 

INTERNATIONAL STOCKS OR EQUITIES

Global diversification is a well-known investment strategy. It encapsulates the notion that a global portfolio is best secured against country-specific threats like economic recession or political unrest. Investors will also share in the gains of multinational corporations through global earnings.

International securities may provide significant diversification, improving the estimated risk-return profile of a total portfolio as compared to a portfolio that only contains Indian equities. This advantage stems from buying shares in several countries, each of which reacts to market and economic conditions differently

Investors can diversify their portfolios by owning shares denominated in a variety of currencies, each of which behaves differently from the underlying stock price. Different economies and currencies respond to business cycles and global developments in their distinct ways. Investors can reduce total portfolio uncertainty by using these offsetting trends, resulting in a smoother ride with comparable returns as compared to investing solely in Indian Stocks

Depending on whether it is measured in dollars or purchasing power parity, India’s share of the global economy ranges from 3 to 8%. As a result, taking part in the rise of the remaining 92-97 percent of the planet is a clear gain. The United States is a desirable destination.

Apple, Alphabet, Dell, IBM, Procter & Gamble, Facebook, and other global technology giants are listed on the New York Stock Exchange. The rupee’s depreciation against the dollar is another major factor for Indian investors to engage in foreign investment

International securities are viewed as unlisted stocks and are thus taxed at 20% of indexation on retention periods of more than two years. Gains in them are charged at a slab rate on shorter retention times.

To conclude, it is beneficial for investors to diversify internationally, and foreign diversification aids in risk management and portfolio planning for long-term development.

This article is contributed by: Ms. Dishita Sheth, Intern at Ajmera Law Group 

June 1, 2021

The New Zealand government has announced the formation of an inquiry commission to examine the country’s working-age immigration policy, including analysing the skilled migrant visa category and making recommendations on how to enhance investment immigration.

Deputy Prime Minister Grant Robertson said, “This inquiry will enable New Zealand to strategically optimise its immigration settings by taking a system-wide view, including the impact of immigration on the labour market, housing and associated infrastructure, and the natural environment.”

The commission’s mandate includes looking into the effects of rising net migration on housing markets, social cohesion, and the global ecosystems, as well as exchange rates and GDP growth. It will also analyse how the country can address potential labour and skill shortages, as well as whether migrants’ skills are aligned with job opportunities in New Zealand.

The inquiry body will emphasise on “how to attract and gain from investor migrants and entrepreneurial migrants whose expertise, experience, resources, and international ties will help New Zealand’s economic and social development, including through the creation of new businesses, and improving New Zealand’s reach into higher-value industries.”

Other questions the commission will address include whether the perceptions that domestic workers’ jobs are being taken over by migrant workers, especially in the low-skilled category, are accurate or not. Student visas as a pathway to permanent residence would also be scrutinised and closely watched.

Before the deadline of April 30, 2022, the Productivity Commission must present its findings.

In a statement, the Productivity Commission’s Ganesh Nana said, “The Commission looks forward to working alongside Maori and Pacific communities, migrant and ethnic communities, relevant government agencies, skills organisations, partners (the New Zealand Council of Trade Unions, Te Kauae Kaimahi and Business New Zealand), and many others.”

This article is contributed by Ms. Dishita Sheth, Intern at Ajmera Law Group

June 1, 2021

By removing the Trump administration proposal that aimed to kill the initiative, the Biden administration wants to resurrect an immigration program that allows foreign entrepreneurs to operate in the United States.

The International Entrepreneur law, which was then proposed by President Barack Obama’s administration three days before he left office in 2017, enables foreign entrepreneurs to work in the United States for up to five years if their start-ups can raise at least $250,000 from the venture capital in the United States, recruit ten employees, or meet other criteria.

As part of its attempts to revive the program, the Biden administration intends to market it. These actions are in response to demands from venture capital firms, which want the administration to support a program that would encourage thousands of foreign start-up founders to relocate to or stay in the United States to expand their ventures.

The Biden Administration is unlocking an enormous job growth opportunity by incorporating the International Entrepreneur Rule, which will help the United States remain the global leader in innovation,” said Bobby Franklin, the group’s president and chief executive.

“Immigrants in the United States have a long history of entrepreneurship, hard work, and creativity, and their contributions to this nation are incredibly valuable,” said Acting U.S. Citizenship and Immigration Services Director Tracy Renaud.

Currently, there is no visa available for start-up founders in the United States, despite the widespread bipartisan support for the concept. Other visa types must be used for foreign entrepreneurs, but none are ideal.

Between 2017 and 2019, USCIS received only 30 applications for the program, with only one being accepted, according to a USCIS official.

According to USCIS, if the program is properly implemented, about 3,000 international entrepreneurs would qualify per year, resulting in the creation of about 100,000 jobs over a ten-year period.

This article is contributed by Ms. Dishita Sheth, Intern at Ajmera Law Group