Paucity of reforms hindering FDI flows

India must make it known it is safe haven for investors

“Setback in attracting FDI is partly due to macroeconomic concerns such as high current account deficit and inflation as well as delays in approval of large FDI projects,” National Council of Applied Economic Research said.

In its latest quarterly review, the council also foresaw a major jump in India’s FDI in coming times with the new manufacturing policy in place, but suggests improvement in the quality infrastructure, governance and overall accountability to public servants to build investors’ confidence crucial for enhanced FDI flows.

Government approved the new manufacturing policy a couple of weeks ago aiming at increasing its share to 25 per cent country’s GDP from present 16 per cent in the coming decade.

The council said, the crisis in Europe, downgrade of US economy, negative growth in Japan due to natural disasters and the fact that China is overheating as an opportunity for India to send right signals to global investors.

By carrying out all pending reforms in the sector, India needs to make a statement that it is a safe haven for investors.

Although the country has survived the global financial crisis and also averaged an economic growth rate of around 8 per cent in the past, it still lags behind in FDI inflows compared to emerging economies of China and Brazil.

However, the experts say, major project clearances in the recent past -- the Rs 32,400 crore RIL-BP deal in the field of gas production and Rs 54,000 crore Posco steel project in Orissa -- are expected to give a major boost to FDI in India, which is pegged at $35 billion in 2011-12.

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