Thursday, December 15, 2011

FOREIGN DIRECT INVESTMENT- ISSUES AND CONCERN-POLITICAL INTERVENTION NEEDED

The Government of India recently decided to put on hold a Cabinet decision vide which, it was proposed to permit multinational corporations to invest in retail sector. We congratulate the top leadership of the government as well as all parties forming part of UPA as well as those who are in the opposition to take such an active interest for this crucial matter and announcing a decision to put the Cabinet decision on hold. The Foreign Direct Investment in retail is actually not needed by the country and all the arguments regarding absence of adequate infrastructure for transportation, storage and distribution of food items and other items of necessity, is required to be addressed by the government by permitting freedom of movement, storage and trading of all agricultural produce and essential items freely across the country. The government need to take special initiatives to provide
concessional financing and taxation incentives besides direct subsidy for creation of cold-storages, warehouses, transportation, infrastructure and setting up of large number of mandis, free from any kind of market fees or taxes on the agriculture produce. There should be complete freedom to
the agriculturists to sell their produce to any one, anywhere without any mandi tax and other levies on the agriculturists or on the buyers.

FDI in Real Estate :

The government of India and the political parties may also please reconsider the policy on Foreign Direct Investments in real estate. The permission to non resident Indians to freely buy and sell properties in India up to any quantum is required to be regulated and monitored. Even the Foreign Direct Investment in real estate construction and development by foreign companies need to be
regulated as the funds from foreign countries are being currently invested openly in buying agricultural land, even without change of land use for couple of months or couple of years.

Where we need FDI?

FDI is actually needed in infrastructure sector including power, ports, roads etc. besides high technology and capital intensive Industries.

Lack of RBI Monitoring:

The RBI has not been monitoring the FEMA policies announced by government as well as the guidelines issued by RBI. A large number of Indian corporate as well as foreign investors are misinterpreting and misusing the liberal words of FDI guidelines, against the intention behind
the liberalization. This is serious matter and requires immediate action at the end of the Government. It may be necessary for RBI to consider prescribing mandatory reporting compliance with FEMA Rules, Regulations and notifications by all investors duly certified by the Auditors.

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