India Seeks to Overhaul Its Foreign Investment Policies By Jacqueline Chia In an effort to provide a more relaxed investment environment in the third largest economy in Asia, the India is now seeking a review of the foreign investment policies as part of the overall plan to lift the ban that limits foreign company expansion outside the joint venture with local firms. In a new discussion paper released on Friday, the Commerce and Industry Ministry of India has proposed to scrap the existing guidelines that limit foreign firms, which have signed joint ventures with Indian companies, from seeking expansion plans outside the deal. “The proposal to scrap the guidelines is part of the series of papers that would test India’s capability to provide a more relaxed investment and business environment to foreign investors,” the paper said. “Today, India’s economy is in much better and stronger position than it was in the early 1990s, when the guidelines were first introduced. After the last review of the condition in 2005, there has been a growing clamor among major businesses on whether there is still a need to continue with the practice,” the paper added. Under the existing law, foreign companies and individuals who have joint venture agreement with Indian firms before 2005 must seek government approval and must prove that a new investment venture would not hurt the financial interest of its local partner. Meanwhile, foreign companies and individuals that have joint venture agreements after 2005 are exempted from the policy. In issuing the proposal, the Indian government argued that the existing measures only discriminate those foreign investors who have shown confidence in the country even when the economy is unstable. In May, the ministry released the first of the discussion papers that resulted to a 300 percent increase in foreign investment cap, with defense equipment production growth rate pegged at 74 percent.
In July, the ministry also released a proposal for the opening of the multi-brand retail sector to foreign companies despite its politically sensitive nature. According to experts, India should make immediate decision over the issue, citing the 18 percent drop in direct foreign investments in the first six months of this year, down to $10.78 billion compared to the previous year. These experts added that the risk of aversion among global investors could grow bigger if India would continue from such constraints. While India has too many constraints for its foreign investors, this is not the case in Singapore which has even provided a complete tax exemption to foreign companies, as long as incorporated in the city-state, on their first S$100,000. According to Singapore-based business solutions provider Rikvin, the Lion Cityâ€™s â€œviable foreign investment policies have resulted to a double-digit economic growth in the first half of the year.â€? Rikvin is a business registration specialist that also provides consultation services to local and foreign investors, companies, and businessmen who want to setup Singapore Company. For more information visit: Rikvin PTE LTD Singapore Branch Office address: 120 Telok Ayer Street Singapore 049705 phone: +6564388887 email: email@example.com website: http://www.rikvin.com/