New Delhi, Sept. 30: Lambasting the BJP government for increasing the political risks in investing in India, former finance minister P. Chidambaram suggested it should lift all caps on FDI flows in order to make the atmosphere conducive to fresh investments.
Speaking at a seminar on FDI conducted by the Indo-American Chamber of Commerce, Chidambaram however also conceded that overall domestic investment had also been lacking over the past few years and FDI as a function of this could not but lag behind. “As a percentage of GDP, the FDI inflow has never exceeded more than 1 per cent. The highest was in the year 1997 when FDI accounted for about 0.9 per cent of the GDP. One can always imagine how serious India is about foreign direct investments,” he said.
“Most of the equity limit or caps on different sectors are totally meaningless and, in fact, are self-contradictory. Also, after 11 years of liberalisation, we should have removed the cap on all sectors barring one or two. We should also abolish FIPB as it acts more like an impediment than as a facilitator,” Chidambaram added.
He said the art of bringing FDI into the country does not involve merely removing FDI equity caps on certain sectors but “also ensuring that the foreign investor has an environment which allows him to do conducive business and make more profits”.
According to Chidambaram, investments in India entail a series of risks including political risk, commercial risk, risk of changing policies and regulatory risks. The minister pointed out that “after the BJP government has come to power, the political risks have increased in the last four years”. As far as the commercial risk is concerned, India is not to be solely blamed as increase in overall recession has precipitated the risk of investing overseas, he said.
Citing an example of the uncertainty dogging the disinvestment process in the last four to five weeks, Chidambaram emphasised that the investor wants to be well aware and have the road map of policy changes in the country he is investing in.