KPMG says new FDI guidelines fail to give clear picture,seeks clarification

The revised foreign direct investment guidelines have failed to give a clear picture and the government should clarify the doubts further...

Written by Press Trust Of India | New Delhi | Published: March 2, 2009 11:47 pm

The revised foreign direct investment guidelines have failed to give a clear picture and the government should clarify the doubts further,global consultancy services firm KPMG says.

Elaborating the government’s FDI policy,KMPG India Associate Director Ravi Shingari told PTI,“The new FDI guidelines have failed to clarify the doubts raised by press note 2 and press note 4 and in turn have raised more doubts.” On February 11,the government changed FDI policy and excluded indirect investment through domestic companies from overall sectoral ceilings which led to criticism that the new policy allows FDI in multi-brand retail through “back door”.

And on February 26,it virtually scrapped the leeway given in its revised FDI policy to foreign firms to enter Indian multi-brand retail sector trough a circuitous route.

But still there are questions that are unanswered and doubts that are yet to be cleared,experts say adding that a there are many contradictions in the FDI policy.

Besides,the new guidelines do not give a clear definition of “investing company” and “investing and operating company”,and it does not clarify the concept of ownership and control.

“As and when we go into the details of the FDI policy we find many contradictions that oppose to the main or the central guideline of Press Note four,” Shingari added. The country is likely to receive $30 billion foreign investment inflows in the current financial year. Besides,an historical analysis shows that FDI in last 10 years has not been affected by the confusing FDI guidelines.

“Though there is doubt in the mind of investors but it would not be a show stopper,” Shingari said and added that “It would be great if these doubts are clarified and simplified for the benefit of all.”

Shingari further said “however,these contradiction and confusions would not be a barrier to foreign direct investments to India”.

India prohibits FDI in multi-brand retail,atomic energy,the lottery business,gambling and betting,chit funds and nidhi firms. Besides,an FDI ceiling has been put on sectors like insurance,aviation,asset reconstruction,private sector banking,FM radio,cable network and commodity exchanges.

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