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FDI flow has been disappointing

The issue on limitations on sectoral caps in foreign direct investment, or FDI, will be taken within a month by the cabinet to enlarge the sources of foreign funding.

"The sectoral caps require a review," secretary at the Prime Minister's Office, N K Singh, said on Wednesday.

Speaking at a seminar on FDI, organised by The Associated Chambers of Commerce and Industry, or ASSOCHAM, Singh said improving the flow of foreign investments has topped the list of the government's priorities.

Though more areas of the economy have been opened up for foreign investments, the inflows of capital have been too slow to make any sizeable impact on the economy.

The share of foreign funds in gross domestic capital formation has declined to 1.4 per cent of the gross domestic product, or GDP, during the 1992-93 to 1996-97 as compared to 2.1 per cent of the GDP in the 80s.

According to latest estimates the total foreign direct investments amount to as much as $ 16.6 billion. Thus, the total FDI accounted for around 47 per cent in the last decade.

"But the new moves in the infrastructure sector should augur well for attracting FDI into the country," says Singh.

In the telecom sector, a new Telecom Convergence Bill will replace the archaic Telegraph Act of 1885 by the next session of Parliament, Singh said. Also the moves towards a revenue sharing regime will also help in attracting FDI flow.

In the power sector, the setting up of regulatory bodies in the states and tariff fixation has been assuring for foreign investors. In roads, the progress in the golden quadrangle has set the ball rolling in FDI flows. "About 5,900 km of roads will be completed by 2003."

The long-term lease arrangement for airports in the civil aviation policy will enhance the scope of FDI flow. The cost of landing rights and cross subsidisation of fuel input remains a serious problem.

Singh added that the involvement of a number of corporate entities in ports will also attract FDI flows.

UNI

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