India’s FDI Rules Complex, Harmful: US Secy Garry Locke.

US commerce secretary Garry Locke has criticised India’s complicated foreign direct investment (FDI) rules and non-tariff trade restrictions, saying they are detrimental to the country’s long-term economic interests. “Even as tariffs come down on some items, non-tariff barriers have proliferated,” Locke said addressing a seminar organized by Ficci on Tuesday. Import licences, standards and certifications and local content requirement were some barriers that foreign businesses faced in India, he said.

“These measures, while they may provide some economic comfort in the short run, will limit the long-term potential for Indian economy and hamper the very innovation that will drive 21st century economic competitiveness,” Locke said, adding that they would limit FDI flow and imports from all over the world. While India had attracted just $16 billion FDI last year, China was able to attract $90 billion because of the speedy clearance.

However, defending the country’s FDI policies, commerce and industry minister Anand Sharma said several changes had been made ever since the policy was implemented in 1996 and all changes were incremental and progressive. He said the government had worked on increasing transparency, lowering transaction cost and removing ambiguity in coming up with a single FDI policy document.

Answering questions on whether India and the US had discussed the issue of allowing DFDI in multi-brand retail, Locke said the two sides had not talked about that specifically. “We talked generally about encouraging FDI in a whole host of areas and making sure that there are no barriers for additional investments. Those barriers can impede the ability of the government and people to achieve their economic and social goals,” he said.

Two government departments came out strongly against further opening up of the retail sector, indicating that the strong push by US President Barack Obama may not yield much in the near future. The micro, small and medium enterprises (MSME) ministry said the government should not allow more than 18% FDI in multi-brand retail, while the communications and IT ministry said opening up of the sector would have an adverse impact on domestic manufacturers. “India should tread cautiously by opening the sector, if at all, gradually and analysing the impact before opening it more. In the beginning FDI less than 18% may be thought of,” the small enterprises ministry said in its comments on the discussion paper circulated by the department of industrial policy & promotion (DIPP), the nodal wing for FDI policy.

This shows a deep division within the government. But the Planning Commission and the food ministry had backed FDI in multi-brand retail, which will pave the way for the entry of global players such as US Wal-Mart and Germany’s Metro into the sector.

Source : fnbnews.com