Centre to streamline FDI policy as foreign investments touch $17.2 bn

The country has managed to receive foreign direct investment (FDI) worth $17.2 billion in the first six months of this financial year, a whopping 137% increase over the same period last year. But the global financial crisis prompted the government to announce on Tuesday that it would further streamline the FDI policy, including easing of FDI norms in the defence sector, to help meet the target of $35 billion for the fiscal.

FDI inflow into the country in September alone was $2.56 billion, a 259% increase over $713 million in the same month last year, according to government data.

Announcing this on the sidelines of a function organized by CII, Ficci and Assocham here, commerce and industry minister Kamal Nath told reporters, ?We hope to keep this momentum going for the rest of the financial year.?

Expressing optimism that the country would achieve the FDI target of $35 billion for 2008-09, Nath said the government would soon look at streamlining various aspects of FDI norms, including procedural issues. In 2007-08, India received FDI inflows of $24.57 billion. In August, the country had received FDI worth $2.32 billion, a jump of 180% over August 2007.

?The Cabinet will consider this (streamlining of FDI norms) in the next couple of meetings. We will see how we can give a new thrust to manufacturing, especially in defence production, by easing FDI norms,?he said, adding that India has the potential to become a leading manufacturer of defence products.

Nath said the government wants to give a signal to the rest of the world that India is open for more FDI. ?We (the government) want to ensure that India continues on the growth trajectory so that the global economic doom is not economic gloom for India,?he said.

Pointing out that FDI inflow in the first six months was based on commitments made by foreign investors much before that, Rajiv Kumar, director and chief executive, Indian Council for Research on International Economic Relations (ICRIER), said, however, that the first quarter of 2009 would be challenging, because by that time the effect of global financial crisis would be seen on fresh FDI inflows into the country.

He said the liquidity crunch would impact realty sector, which has been one of the sectors getting maximum FDI. Software sector, including outsourcing, also will be hit, he added.

Kumar said the government?s move to increase the FDI limit in insurance sector from 26% to 49% would help in attracting more FDI into India. Opposition party BJP has said that it would oppose the Bill raising the FDI cap in insurance if the Bill regarding it is placed in Parliament as the move was not suitable amidst the current economic scenario of the country.