The government?s recent move to allowthe Foreign Investment Promotion Board (FIPB) to approve foreign direct investment (FDI) of up to Rs 1,200 crore, against the existing limit of Rs 600 crore, is expected to quicken FDI inflows into India. But this alone doesn?t ensure the success unless FDI norms are kept transparent and regulations benign to maintain an investment climate. So, besides transparency, consistency too is required in various sectors.

FDI is considered to be an essential tool for reviving economic growth through its bolstering of domestic capital, productivity and employment, and accordingly FDI norms have been liberalised. A recent confidence survey by global consultancy AT Kearney rated India as the third most favoured FDI destination, next only to China and the United States. Moreover, for the first time, manufacturing investors? survey by AT Kearney rated India as a superior manufacturing location than even the US. Despite the global economic slowdown, India has been attracting FDI, recording 13.2% increase in December 2009 at $1.54 billion against $1.36 billion in December 2008, according to RBI. This shows that India, through its structured regulations, has turned itself into an attractive FDI destination. The government has put in place a liberal and investor-friendly FDI policy under which investment up to 100% is permitted in the automatic route in most sectors. Restrictions have been removed from a host of sectors, including retail, telecom, aviation and media.

Yet, examples like the controversy surrounding foreign telecom giant Vodafone?s majority investment in Hutchison Essar Ltd highlight the need for more transparency and control over the regulations. To take another example, ICICI and HDFC, both banks with Indian managements, hold majority stake in foreign entities. Both these banking entities have subsidiaries in the insurance sector and they are not considered by IRDA while calculating indirect foreign holding. So, there is a requirement for more consistency in the entire FDI process.

The writer is student of Post Graduate Diploma in Marketing Management, Xavier Institute of Social Service, Ranchi,, batch of 2008-10. Email: tarunde.xiss@yahoo.co.in