A Critique of The Indian FDI Law And Policy: Problems & Solutions

Abstract

The Indian Foreign Direct Investment (FDI) policy coupled with the pertinent foreign exchange management laws makes the edifice of Indian FDI regime framework. The current FDI policy, 2014 which has been recently introduced has numerous flaws, predominantly due to poor drafting, which are exposed in this paper. By comparing the extant FDI policy with its two previous versions, it is postulated that the Indian government does not appear to be serious in correcting certain apparent flaws of the policy. The charge assumes greater seriousness due to the fact that the author's report to the Government, in response to a public invitation by the concerned department, on the FDI policy, 2012 pointing out many of these flaws, despite being duly received, is apparently overlooked while forming the previous and current FDI policy. Role and powers of a key recommendatory government body, under the 'government route', the Foreign Investment Promotion Board (FIPB) have also been analysed in this paper. Further, apart from the general policy aspects, some of the problems in the drafting of the ‘sector specific conditions’ chapter in the FDI Policy are also discussed. This paper further examines the competence of the Department of Industrial Policy and Promotion (DIPP) under the Commerce Ministry of the Central Government in regulating other forms of foreign investment apart from FDI; and also discusses certain other problems and redundancies which have crept into the exchange control laws contained in the pertinent regulations under the Foreign Exchange Management Act, 1999 (FEMA) causing pragmatic apprehensions of law and policy mismatch and conflicts. Feasible solutions to the avowed problems are also suggested.