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Survey seeks change in FDI norms

July 07, 2004 14:58 IST

Taking a cue from the Chinese experience, the pre-Budget Economic Survey on Wednesday asked the government to simplify domestic policy regime, rules and procedures for enhancing foreign investment flows, which stood lower at $3.57 billion dollar in 2003-04.

"A considerable part of the buoyancy of China's industrial growth observed over the last three decades came from considerable inflows of foreign investment. The slowdown in FDI observed in India in 2002-03 needs to be remedied. Suitable liberalisation of both the FDI and FII regimes, including procedural issues, needs to be considered for enhancing foreign investment flows," the Survey tabled in Parliament said.

Economic Survey 2003-2004: Complete Coverage

The FDI inflows in the country peaked at $4.74 billion in 2000-01, declined thereafter to $3.73 billion in 2002-03 and further to $3.57 billion in 2003-04. This is against 52.7 billion dollar FDI recorded by China in 2002, it noted.

Asserting that foreign investment was important not only for the funds they bring but also for the technological know-how, improved corporate governance practices and access to foreign markets, the Survey said, "A further simplification of the domestic policy regime, rules and procedures is likely to attract higher foreign investment, thus supporting the investment needs of the economy for higher growth."

The Survey noted that overall decline in FDI in 2003-04 was principally on account of a sharp drop in net equity flows.

It said the global reach and market ability of FDI could be effectively utilised to provide a cutting edge to export efforts.

On aggregate portfolio investment inflows, the Survey highlighted the declining trend between 2000-01 and 2002-03 attributing it to a steady fall in portfolio inflows into India.

However, the portfolio outflows in the first half of 2002-03 was taken over by inflows in the third quarter of the same fiscal, the Survey said adding it had much to do with the buoyant state of domestic capital markets and greater FII participation.

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