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25.12.09

Now on, FDI policy to be updated every six months

The government on Thursday promised to bring out an updated foreign direct Investment (FDI) policy every six months as it unveiled a
FDI
comprehensive press note consolidating the entire regime for foreign investments in one place for easy reference.

Commerce and industry minister Anand Sharma released the first draft of the consolidated policy FDI policy on Thursday. He also released the latest FDI numbers, which show a 60% increase in November to $1.74 billion.

"As far as FDI policy is concerned, it has been felt, through interaction with various investors, counterpart government organisations and other stakeholders, that there is a need for further simplification and consolidation of the FDI policy framework, so as to make it more comprehensible to all investors and stakeholders", Mr Sharma said.

The draft consolidated document released would be open for comments until January 31,2010 and a final document will be released by April 1st 2010.

This comprehensive press note will have a sunset clause of six months and will automatically lapse on 30th September, 2010. A new press would be issued every six months, incorporating and reflecting all the changes in the regulations during intervening period of six months.

"The current foreign investments policy is spread all over, in foreign exchange management act (FEMA), RBI guidelines and press notes. It is cumbersome and difficult to understand," a government official told ET, explaining the rationale of the exercise.

Since 1991, the Department of Industrial Policy and Promotion (DIPP) has issued about 177 Press Notes, covering various aspects of FDI policy, including cross border investment, policy liberalisation, policy rationalisation and foreign technology collaborations, Industrial Policy.

The consolidation would ensure the availability of all information on FDI policy at one place, and is expected to lead to: simplification of the policy; greater clarity of understanding of foreign investment rules among foreign investors and sectoral regulators, as also predictability of policy, Mr Sharma said.

The government has, however, clarified that the new draft framework is just a consolidation of previous FDI policy regulations and reflects the current regulatory framework. DIPP has not made changes in the extant regulations.

The government would continue to make changes to the policy through press notes whenever required. However, at the time of the six-monthly revision such changes would be incorporated in the compendium.

FDI inflows for November 2009 have been $1.74 billion which an increase of almost 60% over $1.08 billion in November last year. FDI equity inflows, as a percentage of GDP, have grown from 0.75% in 2005-06 to nearly 2.49% in 2008-09.
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