Tackling the FDI headache
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Tackling the FDI headache


Coca-Cola: its expansion in India has been hampered
by divestment rules

India's problems attracting foreign direct investment, particularly in contrast to China, is often a sore point with Indian officials. A steering group, headed by NK Singh, a former revenue secretary, has been advising on how more might be attracted.

Singh's group produced a report in September that the government is set to act on in the run-up to February's budget. It says that if India is to raise the annual GDP growth rate to 8%, it must attract $8 billion in FDI each year, more than twice 2001's $3.9 billion. India's share of the total $225 billion FDI invested in developing countries in 2001 was just 1.7%, and FDI constitutes under 1% of its GDP, compared with just under 4% in China and Malaysia.

India, says the steering group, has one of the most liberal and transparent FDI regimes among developing countries, and often it is in fact domestic policy - applying to all companies, foreign or Indian - that foreign investors find irksome. Curiously then, the group suggests that limits on foreign ownership must be raised and that India should have a foreign investment promotion law comparable to those in Korea and Malaysia.

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