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« Jewellery maker to invest 4cr for its retail expansion | Home | Real Estate and Banking Sector pull Sensex higher »

Finance Ministry not pleased with new FDI rules

The finance ministry has raised questions on the new foreign direct investment (FDI) rules announced earlier this year, which have driven many domestic firms to rework their ownership structure for attracting inflows in areas such as retail through the back door.

The department of industrial policy and promotion (Dipp) is examining the issues raised by the finance ministry, said a top commerce & industry ministry official on Friday. Dipp is the nodal agency for FDI guidelines in the country.

“The finance ministry has raised some generic issues and we should be able to address them properly,” said Dipp joint secretary Gopal Krishna, without specifying the issues raised by the ministry. Mr Krishna was speaking on the sidelines of a function organised jointly by consulting firm Booz & Company and industry body American Chamber of Commerce (AMCHAM) in Delhi.

The government had amended the FDI policy this February, stipulating that if an Indian company with foreign equity of less than 50% invests in another local firm, it would not be considered as FDI.

Mr Krishna, however, forecast positive FDI inflows, saying they are likely to rise this fiscal despite the ongoing global economic slowdown. “India is expected to receive a total FDI of at least $40 billion by the end of March 2010, as against $37.5 billion last fiscal. Though the FDI inflow projected for 2009-10 does not spell a huge increase over the last fiscal, it is considered a positive development, given the current global financial crisis,” he said.

He pointed out that fresh FDI inflows into India are expected to be $30 billion by the end of March 2010, an increase of 9% over the $27.5 billion recorded in 2008-09. This means the rise in total FDI will be largely due to fresh flows into the country as the reinvested earnings of MNCsoperating in India are expected to remain at $10 billion, the same as last year. Reinvested earnings represent investments made by Indian arms of foreign firms out of their earnings in India.

FDI flows into India have grown substantially since 2005, driven primarily by prospects of strong growth in domestic consumer demand and low-cost operations for

News Published Under:   Banking and Finance, FDI, Real Estate India | No Comments »

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