Complex laws hit pace of FDI flow into the country

CHENNAI: While foreign direct investment from European Union to India has been more or less stagnant, outward flow from India has been on the rise. Complicated regulations and lack of information stand in the way of foreign direct investment flow into India, senior officials said.

Mr Narayan Valluri, team leader, EU-India Investment Facilitation Desk, speaking at a seminar in Chennai on Friday said FDI from EU has been stagnant around Euro 800 million from 1999 onwards.

However, FDI from India grew from Euro 25 million in 1999 to Euro 598 million in 2003. It was true with other developing countries as well, he said. World Investment Report 2005 too pointed out that developing countries are emerging as outward investors.

In fact, size of economy of one third of EU members and 7 of 10 new EU members is lower than that of middle income states like Andhra Pradesh and Tamil Nadu, he said. “We need not be overawed by size of EU as a whole,” he said adding that a number of European Union countries offered opportunities for Indian investments.

Dr Dietrich Kebschull, Chief Programme Co-ordinator, EU-India TIDP said 75% of the foreign funds flow into India were from institutional investors, and only 25% were direct investment. Compare this with China where FDI accounts for about 80%. “This is the direction we have to go,” he said.

However, the regulations — with respect to FDIs, SEZs etc — have become so complicated. “After India opened up for FDI, there have been exceptions to some of the rules, and exceptions to exceptions. There have been amendments and amendments to amendments,” he said. “What was 20 page document 10 years back, has become a library,” he told reporters later.

These regulations needed to be translated for the foreign investors, and Investment Facilitation Desk would help in that, he said. EU-India TIDP also inaugurated an IFD in Chennai. Mr A Sahasranaman, Advisor EU-India TIDP said the programme sought to upgrade regulatory infrastructure and inspection system to meet World Trade Organisation/European Union requirements, enhance training and capacity building and facilitate FDI.