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Economic
reforms and liberalisation of foreign direct investment (FDI)
policy has been a dynamic process in India that has led to
the country having emerged as a global investment
‘hotspot’. Various obstacles to FDI approvals and
implementation have been removed substantially at the
Centre. But the procedures at the State level are still
fairly cumbersome and time consuming which leads to delay
in project implementation.
The reforms
have created a conducive environment for FDI and
market-oriented policies are boosting various economic
activities. India welcomes FDI in virtually all sectors
except lottery business, gambling and betting, retail
trading (except Single Brand Product retailing) and atomic
energy. In sectors like road and port infrastructure,
mining of gold and minerals, and pharmaceuticals, foreign
investors can own up to 100 percent equity without
Government approval. The restrictions to FDI at the
sectoral level are regarding investment caps and foreign
ownerships. However, the Government is continuously
eliminating FDI limits in various sectors to increase
flows and stimulate transfer of technology.
The country is
certainly an attractive destination for FDI especially
given its huge consumer base but there are certain
factors, which have prevented it from realising its true
potential. More can be achieved through continued reforms
that strengthen institutions, improve economic policies,
ease administrative hurdles and create an environment
favourable for private investment.
CUTS
International has completed a study for Organisation for
Economic Cooperation and Development (OECD) to analyse
certain aspects of India’s investment environment; and has
been periodically tracking developments that aim to
achieve investment policy reforms. As a follow up, CUTS
has been preparing monthly updates on FDI policy changes
in India, which are available at the following links:
FDI Policy
Updates
2010
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March |
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January
2009
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2008
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