India needs to reduce barriers to FDI to boost growth: OECD.

Moscow: Bringing down FDI barriers and reducing regulatory uncertainty to attract more private investments will help boost India’s economic growth, according to OECD, a Paris-based body.

Suggesting various measures to boost India’s growth, OECD has said there should be further reforms in the financial sector such as promoting entry of new private banks and establishing a plan to phase out priority lending.

Faced with slowing growth, Indian government in recent times has initiated various reform measures including relaxation in FDI for aviation and retail segments. India is expected to see a growth rate of 5-5.5 percent in current fiscal.

The Organisation for Economic Cooperation and Development (OECD), a grouping of mostly rich countries, said in a report released here that “trade and FDI (Foreign Direct Investment) barriers remain high in some key sectors, impairing productivity improvements”.

It stressed on the need for reducing such barriers. As per OECD, “regulatory uncertainty” should be reduced to promote more private sector investment. “Reforms to further promote the development of a dynamic and efficient financial sector are needed to support investment and growth,” the report said.


According to OECD, the government has eased some FDI barriers, allowing minority foreign ownership in the aviation sector and up to 51 percent foreign ownership in multi-brand retail subject to restrictions such as approval by state governments and local procurement provisions.

The country should further ease FDI restrictions in aviation, multi-brand retail and other sectors, said the OECD report on economic policy reforms and growth. “…further trade and investment liberalisation is needed to strengthen competition and encourage the diffusion of more advanced technology and management practices,” it added.

On financial sector reforms, OECD said that bank portfolio restrictions should be relaxed, including a gradual reduction in share of government bonds held by banks and establishing a plan to phase out priority lending.

Also, the government has to “allow greater participation by foreign investors in the financial services sector and promote the entry of new private banks”. Besides, OECD said effective infrastructure-related regulations should be promoted.

Severe infrastructure bottlenecks endure, particularly in the energy and transport sectors, the report noted. The government should also “streamline land acquisition processes, including through improved land registration, to reduce costs and delays,” it added.


Source : firstpost.com