You are on page 1of 1

FDI: Current scenario and recent changes

The FDI scenario in India is currently witnessing a gradual shift with liberalized reforms over last few years and an attractive investment climate making a positive impact on the inflow. With a steady increase in volume of FDI, India has attracted more than 90 countries till 2010 (29 countries in 1991) across the globe to invest in India making it upstage US in the list of top investment destinations in the world in the UNCTAD WIP Report. There are certain factors which have played a pivotal role in taking India to the world. Demographics, suitable business climate, low man power costs along with availability of talented pool of resources are some of them. India also has certain advantages at the policy level. Collaboration with a local partner is not mandatory for making investment in India, repatriation of capital is easy and low cost, licenses granted can be used to operate from any part of the country. There is also better protection of IP rights simplification of laws and introduction of a uniform Goods and Service Tax and a soon to be introduce Direct Tax Code. Investment into India could mostly follow the automatic route with no licenses or permissions required Investment in sectors that have caps such as single brand retail, private banking, insurance, stock exchange needs to be approved by Foreign Investment Promotion Board. As per the latest FDI policy steps have been taken to evaluate certain sectors having limited or no access to foreign investment. Discussion papers on FDI in multi brand retail trading was released which proposed to increase FDI in Single brand retail to 100% from current 51% and to allow FDI in Multi Brand retail, which will improve the growth rate in organized retail currently one of the lowest in the world at 4%. Consolidated FDI policy in now issued every 6 months, online filing for FIPB application, methodology for calculation of indirect foreign investments in Indian companies now clearly defined. Project Offices are now permitted to open one or more non interest bearing foreign currency accounts for projects to be executed in India, which will give greater flexibility for Project offices to operate. India is placed quite well to attract investments and key reforms have been initiated at the macro level. The need of the hour is to implement policy reforms both at the macro and micro level, prioritize sectors, focus on product-specific SEZs or multi-product SEZs and synchronize FDI policy with export policy. In order to sustain its competitive advantage in being the top investment destination in the world India will also need to address other key issues like lack of infrastructure, restrictive labour laws, absence of Centre-state co-ordination.

You might also like