OECD calls for wider FDI road

NEW DELHI: The Organisation for Economic Cooperation and Development (OECD) has argued for further easing of restrictions on foreign investment flow into India in areas such as banking, insurance and retail distribution where productivity levels are low and greater foreing investment could help raise incomes.

In its first investment policy review of India, the group of 30 developed countries has also suggested that the judicial process for sorting out corporate disputes should be faster.

India has, however, greatly improved its regulatory investment environment over the past decades, OECD secretary general Angel Gurria observed while releasing the report at a symposium organised by CII on Friday.

“The licence raj, which shackled industry with numerous unnecessary permits, has been largely dismantled,” he said. Crucial issues for investors such as strengthening the intellectual property regime and improving the corporate governance framework are also being tackled by the government, Mr Gurria added.

On India’s investment policy, the report suggested further easing of remaining FDI curbs to support the government’s important social and development goals. “Many of the remaining FDI restrictions apply to sectors where productivity and growth need to be enhanced, such as banking, insurance and retail distribution,” the review said.

Responding to the suggestion, commerce and industry minister Anand Sharma said that India already allowed 51% FDI in back-end retail operations and single-brand retail. He said, it was not possible to allow FDI in multi-brand retail as a large number of small shop-keepers livelihoods depended on it. “It is an issue of social security,” he said.

The review stressed on the need to expedite the judicial process in the country pointing out that for investors, significant delays in justice can mean bankruptcy. Strengthening the capacity of the judicial system could make a big difference to investment, it added.

Mr Gurria said that the investment policy review is a landmark in the growing cooperation and enhanced engagement between India and the OECD. For future cooperation, the OECD proposed to undertake joint future work on green growth, promoting infrastructure development through public-private partnerships, developing nationally consistent regional FDI statistics and launching a review of the regulatory policies of India.