e   rit    ar et in ndia     14.15
     cliff 11 in the US had a positive impact on the market               (iii) The RBI also relaxed some investment
     worldwide including in India. Further, reform                              rules by removing the maturity
     measures recently initiated by the government                              restrictions for first time foreign investors
     have been well received by the markets.                                    on dated G-Secs (earlier a three-year
                                                                                residual maturity was must for first time
     neW rules for foreign investment                                           foreign investors). But such investments
     To promote the flow of foreign funds into the                              will not be allowed in short-term paper
     economy the RBI, on 24 January, 2013, further                              like Treasury Bills.
     liberalised the provisions of investment in India’s                  (iv) Foreign investors restricted from investing
     security market—                                                           in the ‘money market’ instruments
           (i) FIIs and long-term investors12 investment                        —certificates of deposits (CDs) and
                 limit       in       Government          Securities            commercial paper (CPs).
                 (G-Secs) enhanced by US $5 billion (to                    (v) In the total corporate debt limit of
                 US $ 25 billion).                                              $50 billion, a sub-limit of $25 billion
         (ii) Investment limit in corporate bonds by                            each for infrastructure and other than
                 the above-given entities enhanced by $5                        infrastructure sector bonds has been
                 billion (to $50 billion).                                      fixed.
                                                                          (vi) Rules requiring FIIs to hold infrastructure
                                                                                debt for at least one year has been
       11.    ‘Fiscal cliff’ is a term used to describe the crisis that         abolished.
              the US government faced at the end of 2012, when the       (vii) The qualified foreign investors (QFIs)
              terms of the Budget Control Act of 2011 were scheduled
              to go into effect – a combination of—i). expiring tax             would continue to be eligible to invest
              cuts and ii). across-the-board government spending                in corporate debt securities (without any
              cuts scheduled to become effective December 31, 2012.             lock-in or residual maturity clause) and
                he idea ehind the fiscal cliff was that if the federal
              government allowed these two events to proceed as                 mutual fund debt schemes, subject to a
              planned, they would have a detrimental effect on an               total overall ceiling of $1 billion (this
              already shaky economy, perhaps sending it back into an            limit of $1 billion shall continue to be
              official recession as it cut household incomes, increased
              unemployment rates and undermined consumer and                    over and above the revised limit of $50
              investor confidence As per the conservative estimates             billion for investment in corporate debt).
              by some US experts, it would have meant a tax increase
                                                                        (viii) As a measure of further relaxation, it
              to the size of which the country had never seen in the
              last in 60 years].                                                has been decided to dispense with the
                 ho first use the term is not clear some elieve that            condition of one year lock-in period for
              it was first used y oldman Sachs economist, Alec                  the limit of $22 billion (comprising the
              Phillips, while some others credit Federal Reserve
              Chairman Ben Bernanke, still others credit Safir h ed,
                                                                                limits of infrastructure bonds of $12
              a reporter for the St. Louis Post-Dispatch, who in 1989           billion and $10 billion for non-resident
              used the term while writing a story detailing the state’s         investment in IDFs) within the overall
              education funding. Sources: The contemporary news
                                                                                limit of $25 billion for foreign investment
              reportings and articles which appeared during the time
              in The Economist, The Guardian, The New York Times                in infrastructure corporate bond.
              and The Newsweek.                                           (ix) The residual maturity period (at the time
       12.    ‘Long-term investors’ include SEBI-registered                     of first purchase) requirement for the
              ‘sovereign wealth funds’ (SWFs), multilateral agencies,
              endowment funds, insurance funds, pension funds and               entire limit of $22 billion for foreign
              foreign central banks.                                            investment in the infrastructure sector has