FDI: Time to Get The Money In.

When the department of industrial policy and promotion (DIPP) came out with a 21-page discussion paper on opening multi-brand retail to foreign investors two months ago, it came as a surprise even to die-hard pro-reform activists and lobbyists.

After all, the fierce debate on whether to allow FDI in multi-brand retail or not, came to a grinding halt in February 2007 after Congress president Sonia Gandhi shot off a letter to the Prime Minister sharing the concerns of the Left parties.

Over three-and-half years down the line, the industries ministry has not only revived the old debate by bringing out a discussion paper on FDI in multi-brand retail, it has also generated hopes of a new investment climate with a wide-ranging reformist agenda that includes raising the FDI limit in defence production and easing of norms for foreign companies having tie-ups with a domestic firm to expand operations independently.

While America is becoming protectionist, with the fear that the ban on outsourcing by Ohio state could be followed by other states too, India has demonstrated a more positive outlook to woo foreign investors in key strategic sectors.

A whiff of fresh air comes at a time when India, according to an UNCTAD survey, has replaced the US as the second most important FDI destination for transnational corporations during 2010-2012. The survey finding puts India as the most preferred destination for foreign investors, second only to China. As global FDI flows are expected to jump from $1.2 trillion this year to $1.6-2.0 trillion in 2012, changing the ecosystem of foreign investment in India could pay rich dividends.

“We would like to bring in some changes in policies so that investment climate for foreign investors improves. So far as raising the FDI limit in defence is concerned, technology transfer is the key. Even though we proposed allowing up to 74% FDI, we may now come down to 49% after receiving feedback from various quarters,” says RP Singh, secretary for the DIPP and one of the key officials pushing the government’s proposed liberal FDI regime.

But there has been a mixed reaction from industry and social groups on the proposed FDI policy change in retail and defence sectors. Whereas Tarun Das, former chief of industry body CII, favours allowing of majority foreign equity in defence sector, the CII says the FDI limit should, for the present, be retained at 26%. Even industry body Ficci has cited JVs such as BAe-Mahindra&Mahindra, Sikorsky-Tata, EADS-L&T, Speck-IAI, Lockheed Martin-Tata, and so, to bring home the point that existing 26% FDI limit is doing pretty good.

Source : economictimes.indiatimes.com