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Land Border FDI Norms for India Explained for Investors

India border countries: 347 FDI proposals received from countries sharing land border with India; 66 approved - The Economic Times

Introduction:

The article discusses government data showing nearly Rs 1 lakh crore FDI proposals received from land border sharing nations since Apr’20 needing approvals per policy change with 50% cleared so far.

Analysis for Layman:

India’s Foreign Investment Rule Amendment:

India amended foreign investment rules in April 2020 requiring all proposals from countries sharing land borders to seek government approval first irrespective of sector or ownership structure to prevent risks of opportunistic takeovers of Indian companies during COVID-19 disruption. Earlier only certain sectors had restrictions.

Impact on FDI Proposals:

This impacted FDI proposals from China, Pakistan, Bangladesh, Nepal, Bhutan, Myanmar, and Afghanistan. As per latest data this change has resulted in FDI proposals worth Rs 1 lakh crore requiring approvals over the past 3 years with around 50% cleared so far. The remaining faced delays or got rejected or withdrawn by investors unwilling to wait.

Focus on Manufacturing Sectors:

Most proposals were in manufacturing sectors like machinery, chemicals, electronics hardware, and software services. Going forward government will evaluate case by case based on value addition promised before granting approvals.

Original Analysis:

The aggregated FDI proposal figures indicate that notwithstanding COVID-triggered policy changes necessitating closer scrutiny, India has maintained openness standards by clearing 50% applications from land border neighbors. But there is opaque inconsistency around reasons why balance 50% remains in limbo losing viability.

For a nation focused on improving ease of doing business rankings to attract capital, this signals bureaucratic fences continue hampering speed of decisions causing uncertainties even for legitimate investments in priority areas like manufacturing. Set templates specifying approval conditions for different sectors could prevent value leakage from delays across emerging segments where India aims self-reliance.

Thus process re-engineering is the need of the hour alongside judgment-driven discretionary norms to balance diligence with development. Siloed thinking can constrict vision when strategic priorities beckon swift responses. Consistent reforms hence must factor execution.

Impact on Retail Investors:

For stock investors, while the aggregate FDI proposal numbers signal continued investor interest from major partner countries, red tape driven execution delays even post-clearance remains an area necessitating urgent reforms By some estimates over 75 projects from China awaits approvals losing viability daily basis. This leads to suboptimal gains for domestic shareholders.

Easing norms without compromising security concerns via standardized operating protocols will lift investor sentiments boosting economically productive FDI inflows. Thus retail shareholders must track progress on the promise of selective liberalization across emerging areas as a marker of India consolidating an open, mature investment climate matching global standards befitting its growth potential.

Impact on Industries:

Most of the FDI proposals awaiting approvals span machinery, electrical equipment, auto components, chemicals, and technology products manufacturing where India aims self-sufficiency and exports competitiveness globally. Thus the capital and knowhow benefits from delayed FDI could severely hamper these ambitions if project shelf lives expire before clearances.

For domestic industries the blockades continue posing hurdles on collaborations, partnerships, and JVs with tech advanced neighbors losing win-win opportunities. Thus while stable investment policies matter, bureaucracy-driven opacity in clearance processes defeats the purpose which needs streamlining to align with economic priorities.

Conclusion:

While India tightened FDI rules for land border sharing nations owing to COVID jitters, significant capital inflow proposals awaiting decisions signals costs of dysfunctions within government systems hampering speed despite progressive measures. Building transparent frameworks suiting different sectors which values judgments add versus constrain development is vital.

Citation:

PTI. “FDI Proposals Worth ₹1 L cr Received from Nations Sharing Land Border with India.” Economic Times, 4 Dec. 2023.

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