The government needs to ease policies to lure FDI
There was a lot of opposition when the FDI (Foreign Direct Investment) bill was presented in the Parliament during the UPA regime. Within a month of taking charge, the new government has sent out strong signals of its commitment to easing the rules for FDI.
The government wants to ease the entry barriers into defence, high speed railways and e-commerce sectors and wants the foreign investors to help with the funding of these projects. As per the UNCTAD (United Nations Conference on Trade and Development) data, despite significant reforms in the FDI regime since 1990, India’s share in FDI stood at only 1 % in 2012. It seems that mere liberalisation of FDI rules may not really help.
While the country ranked third in purchasing power parity, its position was 15th in terms of FDI inflows (14th in 2011). It is clear that with the influx of jobs and increase in the education levels of India Inc. with a focus on engineering, medicine, business management and other skilled sectors, the job generation has increased a lot in the last few decades. This has increased the buying power.
However the irony is that China, which has widespread formal restrictions on inward FDI, has been the top recipient of FDI inflows. China has FDI restrictions in a long list of sectors deemed critical to its economy. Beijing regularly publishes lists of sectors where foreign investment is either encouraged, restricted or prohibited.
In spite of all the restrictions, it seems China has become the favourite destination of the foreign investors.
Source- The Financial Express
FDI, Foreign Direct Investment (FDI)., Foreign Direct Investment in India, foreign direct investment in retail, UNCTAD, United Nations Conference on Trade and Development
