Fidelity's abrupt departure from the Indian mutual fund market earlier this year underscored just how new rules governing commissions and fees are strangling growth in what could be an emerging market and turning it into a miserable disappointment.

Now regulators in India may be acknowledging their tight ways. The Wall Street Journal reports that India's Economic Affairs Secretary R. Gopalan told reporters that they are considering ways to boost the mutual fund industry in India, including possibly changing the tax laws governing funds.

Currently, mutual fund sponsors are responsible for a service tax on mutual funds. That tax could be shifted to fund shareholders.

In 2009, Indian regulators barred mutual fund firms from levying sales fees and commissions. That decision could also be reversed.

A key change in the political environment came when India's Prime Minister Manmohan Singh added the job of finance minister to his duties and told reporters that India's government needs to seek ways to grow that nation's $117 billion mutual fund business.

Gopalan hinted that structural changes would need to take place to address the issue.

H N Sinor, head of Association of Mutual Funds in India, is also calling for regulatory changes to allow insurers to hire asset managers to handle their portfolios. 

Edited by: Sean Hanna, Editor in Chief


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