India's proposed tax rules a 'BIG Mistake': Mark Mobius

SEOUL: India is faltering as an investment destination because of significant policy mistakes and stock prices will slide if the nation's credit rating is cut, according to Mark Mobius, one of the world's best-known emerging market investors.

"The Indian government has been making many many big policy mistakes. The most important of all is the idea of having retroactive taxation," Mobius, executive chairman of Templeton Emerging Markets Group, told Reuters in a phone interview from the Bahamas.

Foreign investors have raised concerns on two Indian provisions seeking to tax indirect investments and combat tax evasion.

The first gives India power to retroactively tax the indirect transfer of assets. The second targets tax evaders via the General Anti-Avoidance Rule ( GAAR), putting the onus on investors registered in countries with special tax exemptions with India to prove they do not intend to explicitly avoid tax.

Mobius's team manages $50 billion worth of emerging markets equities for Franklin Templeton Investments, an arm of U.S. money manager Franklin Resources Inc.

India constituted 16.1 percent of Mobius's $17.7 billion Templeton Asian Growth Fund as of end-March. The flagship fund had Indian software exporter Tata Consultancy Services among its top-10 holdings.

Standard & Poor's last week cut India's credit rating outlook to negative from stable, reflecting the toll that hefty fiscal and current account deficits and political paralysis are exacting on Asia's third-largest economy.

The agency warned the country had a one-in-three chance of losing investment-grade status.

"If it actually happens, it will be a big shock. The market will be shocked and prices will sharply decline," Mobius said.

Source: The Economic Times. To read full article : CLICK HERE