'Attract foreign capital by changing FDI rules'

New Delhi, June 24: Suggesting India should emulate China and Taiwan, an industry body said the country should define its FDIs list by clearly making distinction on how many sectors of the Indian economy fall within four ambit of permitted, encouraged, restricted and prohibited list to absorb foreign funds.

The suggested move will make India one of the largest recipients of FDIs in South and East Asia and could possibly emulate countries like Taiwan and China in terms of FDIs inflows in near future, said Assocham in a note to be submitted to the government and RBI shortly.

The current policy on FDI's attraction in India is defined under RBI-regulated automatic route and FIPB-sanctioned approval route with variety of ceiling limits imposed on them.

''This results into non-clarity and discourages foreign investors to channelise their surpluses in India's manufacturing sector, which needs FDI's the most,'' said Assocham President Venugopal N Dhoot.

The countries which have not elaborately defined listing for FDI's have lagged behind in attracting overseas capital, particularly in South and East Asia, he added.

For the financial year 2006-07, Assocham noted that China, which has categorised its FDIs investment in an elucidated manner, received over 75 billion dollars worth of FDIs , while Taiwan's FDI inflow estimated at over 65 billion dollars against 15.7 billion dollars in India in said period.

The industry chamber noted that the manufacturing sector of China had used 42.4 billion dollars of FDIs in the fiscal 2005-06 against 1.4 billion dollars in production and supply of power, gas and water, while using 5.4 billion dollars in real estate.

It had spend 1.8 billion dollars on communication and transport sector.

In case of India, its services and telecom sector have been the largest contributory towards receiving FDIs ever since the liberalisation reached half a way through, says an Assocham estimate.

In total, overseas capital from 163 countries flew towards China while in case of India, the approved FDI's have come from not more than 25 countries. Prominent among them were the US, the UK, Germany, France, Italy, Australia and Canada, said Mr Dhoot. He added that 'permitted' category stands for any industry not listed in another category .

Under the 'encouraged' status were those promoting development of agriculture, involve high technology, upgrade product quality, promote environmental protection, promote exports and help in the development of the poorer and less-developed interior regions.

Restricted industries includes those that are technologically backward, environmentally unfriendly or industries that are being opened up to foreign investment on a pilot basis.

Prohibited industries are those that use technology unique to China or those that harm the national interest, are damaging to the environment or human health, jeopardise security or are politically sensitive.

There are many opportunities for foreign investors to assist with mechanisation, improving yields and quality, better distribution and marketing of products of all kinds, the chamber noted.

'Restricted' are those Foreign Investment Projects which include Projects involving new agricultural technology, comprehensive development of agriculture and construction of industries in energy, transport and important raw materials.

UNI