FOREIGN DIRECT INVESTMENT AND ECONOMIC REFORMS
Abstract
In the context of increasing competition among nations and sub-national entities to attract Foreign Direct Investment (FDI), the present paper tries to analyze the emerging trends and patterns of FDI inflows into India in response to various policy measures announced by the Government of India. The FDI policy hasn’t offered peace of mind to foreign investors due to lack of clarity and consistency in the policy. Investment decisions are not dependant on whether the sector is under automatic approval route, but on clarity of investment rules. For making India the most favoured destination for FDI, increment in the investment cap and reduction in existing barriers obviously help. But that alone may not be sufficient to convince foreign investors. It remains absolutely essential to provide simple and clear rules that make doing business in India an attractive option for foreign investors. India’s policymakers would do well to understand the tradeoff that lies between a huge bureaucracy regulating capital, and the willingness of foreign investors to invest in India. The recently announced FDI changes, favourable changes in tax policy and other steps like setting up the Cabinet Committee on Investment to clear pending investment proposals, at last seem to suggest India is back in business. But the last few years have left deep scars in the minds of people.
Authors
Vijit Mittal