While advocating several reforms in Foreign Direct Investment (FDI) policies, the Economic Survey 2007-08 emphasised on ‘greater FDI’ that can effectively combat Non Tariff Barriers (NTB) with major trading partners. In one of its major FDI policy reforms, it advocated 100 per cent FDI in foreign branded specialised retail chains. The specialised retail chains include luxury brands, consumer durables and semi-durables. If implemented, the reform would pave the way for specific international retailing giants to enter India with or without an Indian partner. Till now, a foreign retailer could enter India with 51 per cent FDI in single brand retailing with prior government approval. Asitava Sen, VP (Retail), Technopak says if the proposed reform if passed It sets the tone for a level playing field for foreign retailers and sends the right message. “We require FDI in the front-end as well as back-end retail operations. The retailers will now seriously look at India as an investment destination,” he said. In effect, electronic retailers like US-based Circuit City and UK-based Dickson can retail their wares in India. The high GDP growth that the country has been witnessing from the past two years, will attract foreign capital looking for profitable investment opportunities, leading to an even higher growth, ascertains the survey. As an outlook for the medium term, it predicts a surge in FDI, which will continue to grow. Noting that the FDI limits are ‘too low’ for insurance sector, the survey suggested raising the current limit of 26 per cent to 49 per cent, at the same time making 51 per cent allowance for special category companies. “Allow 51 per cent foreign equity in insurance companies providing insurance to rural residents and for all agricultural related activities including agro-processing,” it said. The survey proposed allowing 100 per cent FDI in Greenfield private Rural-Agriculture bank that would be free to set up branches in rural or semi-rural areas. These banks can lend to agriculture and related sectors in any non-urban area. Later, it could also be allowed to expand into small towns when general Foreign Direct Investment banking policy is liberalised. However, banking sector remains a government oligopoly despite entry of private players, the survey pointed out.
