India to open up its economy to foreign investment
India's government has announced plans to open up the country’s economy to foreign investment as Prime Minister Narendra Modi seeks to counter accusations that his reform drive is stalling.
According to the announcement on Tuesday, the Indian government said it is planning a sweeping liberalization of the country’s foreign direct investment (FDI) regime in order to attract foreign capital, AFP reported.
The government added that it will embark on a raft of reforms to open up 15 areas of India’s economy, and pave the way for overseas investment in critical sectors including defence, banking and construction.
New Delhi will also eliminate current restrictions on investment in certain sectors including broadcasting and air transport, while also increasing the use of "automatic" routes for gaining investment approval in others.
Taking part in a press conference on Tuesday, India's Finance Minister Arun Jaitley said the reforms target New Delhi's "top priority emphasis" of making it easier for companies to do business in India, which is notorious for its heavy bureaucracy and labyrinthine regulations.
"In the last few months growth in India is being driven by public investment, some private investment and increased foreign direct investment," Jaitley added.
"In some areas sectoral caps have been enhanced but more important than that some outdated conditionalities, which existed along with the sectoral caps have been either done away with or eased," the minister noted.
The reforms come after Modi's Bharatiya Janata Party (BJP) was defeated in state elections in Bihar, where the government was engaged in a battle largely over development in India's poorest state.
The declared reforms are also considered to be a signal of intent ahead of the prime minister's first visit to Britain as leader of India later this week, where he will seek to encourage Britain’s investment in India.
"It is a welcome move and will be positive in the eyes of foreign investors but the impact will only be felt years down the line," said Devendra Kumar Pant, chief economist at India Ratings & Research in New Delhi.
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