Defense and retail sectors going for FDI liberalization as US demand for opening up of various sectors of the Indian economy to foreign investors


The Indian government Thursday announced that it would allow calibrated FDI openings in retail and defence. In its assurances to the US Inc over its concerns on infrastructure, investments restrictions and other FDI impediments, the government said the challenges would be addressed promptly, with a blueprint to be made ready for talks ahead of US President, Barrack Obama’s visit to India in November.


American companies had requested the Indian government to tackle concerns regarding FDI in infrastructure and insurance, expecting necessary legislative actions to be expedited, said Indian Finance Minister, Pranab Mukherjee. During the Indo-US CEOs summit, the Indian Commerce and Industry Minister, Anand Sharma, pledged that there would be calibrated FDI liberalization in defence and retail in the wake of the US demand for opening up of various sectors of the Indian economy to foreign investors.


With the Indian government looking for US investors to bridge an approximated $250 to $300 billion gap in infrastructure investments the country needs in the coming five years, Mukherjee promised US CEOs at the summit that there would be a high level panel for identifying areas of concern and creating a blueprint for discussions before the US presidents visits the country.


India’s bid to bring in US investments is targeted at achieving double digit economic growth by 2012, an increase from an approximated over 8.5% in the current financial year, said Mukherjee. Additionally, the Minister noted that China’s decision to allow its Yuan to gain against the dollar might not impact India greatly and is a welcome move in the long term.


US CEO’s had concerns over the FDI environment in India, for which Mukherjee said legislation was pending on the sectors of concern, like the 26% to 49% increase in FDI in the insurance sector that was still pending legislation.


Additionally, concerns over taxes and liberalization would be met by replicating the model in the mega power project infrastructure and others, he said. However, most of the legislations for streamlining FDI in the country were pending and he noted that the government would try to expedite them. 


FDI is not allowed in multi-brand retail, which is dominated by the neighbourhood kirana stores and is a politically-sensitive topic. However, foreign players are permitted in wholesale trade as also in single-brand retail.


Currently, 26 per cent FDI is allowed in the defence sector. Separately, the Commerce Minister, Anand Sharma, said India’s initiatives like simplification and consolidation of the FDI policy would go a long way in improving business environment in India.



25 June 2010.