Investment limits for the Foreign Institutional Investors (FIIs) have been enhanced in a phased manner to $ 15 billion in G-sec and $ 45 billion in the case of corporate bonds (including $ 25 billion for infrastructure sector bonds/units).Some observers argue that in the absence of significant investments by foreign investors, markets are deprived of not only a large and liquid pool of savings but also active global trading strategies which can contribute to the much needed trading liquidity.
We are mindful here that the South East Asian capital markets were highly liberalized – in fact that is why money was able to move out so quickly in 1997. Yet everything points to the fact that financial liberalization assists in capital market development, particularly if they have global objectives.