FDI has declined, says Kamal Nath

Date : Dec-17-2008 12:12 The Foreign Direct Investment (FDI) in the country has turned down by 26 per cent in October this year as a result of the global economic slowdown. The FDI inflows during April-September 2008 showed an increasing trend each month in comparison to the same period in the previous year, Union Commerce Minister Kamal Nath informed the Lok Sabha in a written reply on Dec 16. However, the trend changed in October when it fell by 26 per cent, he said, adding that it would be difficult to assess whether the ongoing projects in India would be affected. Quoting various studies by international agencies and analysis, he cautioned that FDI flows to developing nations would generally decline.

Under the liberalized economic environment, investment decisions are based on the macro-economic policy framework, investment climate in the host country, investment policies of the trans-national corporation and other commercial considerations, he said. The Minister, however, said the government had put in place a liberal and investor-friendly policy on FDI under which investment up to 100 per cent was permitted on the automatic route in most sectors/activities. A slew of initiatives to encourage demand had been taken and this would enable India to continue as an attractive investment destination, Mr. Nath said.

Govt. may introduce insurance bill in next session

New Delhi: The much-awaited comprehensive insurance bill, which seeks to raise foreign direct investment cap in private sector to 49 per cent from 26 per cent, is likely to be introduced in the forthcoming session of Parliament.
The draft is being vetted by the Law Ministry and would be moved for Cabinet approval once it is cleared by the Ministry, Finance Ministry sources said.
It is expected to go to the Cabinet for clearance before the session begins, sources said.
Parliament session is scheduled to begin from October 17.
Last month, a Group of Ministers headed by External Affairs Minister Pranab Mukherjee had cleared a proposal to hike FDI limit from 26 per cent to 49 per cent.


The proposed changes include amendments in the IRDA Act, 1999 and LIC Act, 1956 among others.
The UPA regime had proposed raising the FDI cap in its first budget in 2004-05. However, opposition from the Left parties forced the government to refer it to GoM in 2006-end.

The government failed to pursue the insurance sector reforms because of pressure from the Left, which was their ally.
The government took a conscious view to pursue the pending economic reforms, including those in the insurance sector.
Following opening of the insurance sector in 2000, about 3 dozen private companies have started operations in the country. Many of them are constrained by the 26 per cent FDI and have been making a case for raising the foreign investment cap.
Following withdrawal of support by the Left, Finance Minister P Chidambaram had earlier expressed confidence over pursuing the economic reforms agenda by pointing out that BJP is "obliged" to support certain key financial sector legislations.

Source: www.mid-day.com