Foreign Direct InvestmentA large portion of the FDI has been flowing into the skill-intensive and high value-added services industries, particularly financial services and information technology. India, in fact, dominates the global service industry in terms of attracting FDI with its unassailable mix of low costs, excellent technical and language skills, mature vendors and liberal supportive government policies.
General Government Initiatives The Indian Government's approach towards foreign investment has changed considerably during the past decade. Foreign investment, which was permitted only in restricted industries under exceptional conditions, has been liberalised across the board, excluding certain restricted or prohibited industries. The sweeping economic reforms undertaken by the government aimed at opening up the economy and embracing globalisation have been instrumental in the surge in FDI inflows.
The government has taken various steps to further facilitate and augment the inflow of foreign investment into India.
- The government would soon remove the compulsory disinvestment clause on overseas companies in major sectors like food processing and chemicals, a move aimed at simplifying foreign direct investment (FDI) rules further. The finance ministry is weighing the proposal after the Department of Industrial Policy and Promotion (DIPP, which formulates FDI policy) suggested waiving the clause for all companies that have decided on divestment.
- The government may allow 49 per cent FDI in segments such as gems & jewellery and apparel after National Council of Applied Economic Research (NCAER), which studies the effects of multi-brand retail in India, submits its report.
- Restructuring the Foreign Investment Promotion Board (FIPB).
- Shri Kamal Nath, Union Minister of Commerce & Industry, has stated that Foreign Direct Investment (FDI) up to 100 per cent is permitted under the automatic route in most of the sectors.
- Establishment of the Indian Investment Commission to act as a one-stop shop between the investor and the bureaucracy.
- Progressively raising the FDI cap in other sectors like telecom, aviation, banking, petroleum and media sectors among others.
- Removal of the investment cap in the small scale industries (SSI) sector.
- Companies will now require only an FIPB approval for investments up to US$ 231.90 million (Rs 1,000 crore). Clearance from Cabinet Committee of Economic Affairs (CCEA) will be imperative only for investments above US$ 231.90 million (Rs 1,000 crore).
These measures will greatly enhance the global community's confidence in the fundamentals of the Indian economy, and reflect the efforts of the Indian Government to integrate with the global economy. With government planning more liberalisation measures across a broad range of sectors and continued investor interest, the inflow of FDI into India is likely to further accelerate. Already, upbeat due to the buoyant FDI growth in the country, the government has put a target of US$ 35 billion in FDI, in 2008-09.