The Hindu : Business : MPs question claims on surge in FDI

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Saturday, Mar 26, 2005

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MPs question claims on surge in FDI

By Our Special Correspondent

NEW DELHI, MARCH 25. Contrary to Government's contention that FDI (foreign direct investment) inflows have registered consistent growth, the Parliamentary Standing Committee on Commerce said the FDI flows were stagnating at $4-5 billion in the last few years.

The committee notes that barring 2001-02, when FDI inflows shot up to $6.13 billion, the FDI flows during 2000-04 were in the range of $4.03 billion to $4.6 billion.

In a report on action taken on its 54th report on foreign direct investment laid on the table of both Houses, the committee says the "basic malaise'' behind stagnation was the plethora of taxes at the Central and State levels, different import duty rates and higher interest on loans. It, thus, suggests that the process of reforms in the financial sector should be expedited.

As it has noted that the pace of measures to amend various labour laws was extremely slow, it has urged that the required steps towards labour reforms be speeded up and some time limit be fixed to complete the exercise.

Single body suggested

The committee, headed by Murli Manohar Joshi, has proposed creation of a single body to reduce bureaucratic obstances for foreign investors. This could replace the existing Foreign Investment Promotion Board and the Foreign Investment Implementation Authority, which act separately. The suggestion was made in the light of the assessment that the FIPB is not engaged in promotion of FDI but in resolving difficulties of investors. "The committee feel that the major grievance of the foreign investors has been the multiplicity of bodies for approvals of investment and implementation of projects,'' it has stated.

Similarly, the committee feels that the Chinese success story on special economic zones was worth emulation. In contrast, it notes that the country's policy regarding setting up of SEZs is not clear at present. "The committee hope that the Government put in place a proper policy on the setting up of SEZs as they have the potential of attracting FDI and ensuring efficient mechanism for proper implementation of the policy,'' the report says.

In a comment on security issues, the committee said that in the interest of the country's internal security, "it is necessary to keep identifying and having a tab on the source FDI investors.'' For this, it suggests that the Commerce Ministry maintain a close liaison with the Home Ministry and other ministries concerned.

On differences in data regarding FDI inflows, it says there is no clear picture. It therefore recommends close linkage and synergy among various ministries, the Reserve Bank of India and states to have close monitoring and latest information about FDI inflows. In this context, it has noted that since the proper mechanism to monitor FDI inflows is not in place, it becomes difficult to find out the contribution of FDI to the economy. The committee recommended that a close watch be kept on areas in which FDI is being made and the index of development as a result of FDI should be updated regularly.

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