Theme: FDI
News 1: US ambassador Mulford says "Failure to follow through in raising the cap (in insurance from 26 to 49%) is increasingly seen by investors as a breach of faith”, adding that "if India wishes to regain its credibility in the eyes of foreign investors this promise of 49 per cent FDI needs to be delivered sooner than later". Left reacts strongly to this comment (US dictating India policy). IRDA (insurance regulator) comes in support of insurance cap hike.
Reason: India promised hike ‘upto’ 49% in insurance in 2001. Technically, there is no breach of promise. But investors normally assume that countries follow up on these claims sooner or later. That is why so many companies like Aviva, AIG etc. set up shop here. That Left makes so much noise only shows its xenophobic character.
News 2: China attracts more FDI than India. Therefore India’s FDI policy should be more investor friendly. How do you counter it?
- China’s FDI figure is not because of foreign policy, but due to NRC (non resident Chinese) investment in china. Without taking that into account, MNC investment in china is not much higher than India.
- India doesn’t follow IMF norms when it comes to FDI. This one is a little complicated. But you can visit the link if you want to know why. http://economictimes.indiatimes.com/articleshow/1016361.cms
Conclusion:
Though good investor climate and reforms are a must, don’t expect quantum leap in FDI into India if you do it.
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