Trust deficit versus fiscal deficit

The stock markets have been quite nervous these past few days due to fears that the finance ministry might use the newly-introduced General Anti Avoidance Rules (GAAR) against foreign hedge funds and other entities who invest in the secondary market through Participatory Notes (PNs). A good 16.4% of all outstanding FII investments are through PNs and the real owner of these investments is often difficult to establish. In any case, nearly 85% of all FIIs invest in the Indian market through the tax haven Mauritius.

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