NEW DELHI: The Governments projections of a sharp rise in foreign investment in the next two years appear to be grossly overestimated. Government officials are no longer euphoric about prospects of an annual foreign i vestment low of over 2 billion in the next 2-3 years.

On the Contrary they now point court that foreign investment during this time would go up only to about $600-700 million. This would be a substantial increase from the $200 million in 1991. It will not however be enough to achieve the finance minister Dr Manmohan Singhs goal of attracting $6 billion as foreign investment in the next two-three years they say.

The success of the current program of economics is dependent on the government’s ability to attract more foreign investment. Increased foreign investment would provide a more viable source of capital inflow to meet the country’s external figuring. Official sources admit the government launched its drive to attract foreign investment quite effectively. But these efforts have not been followed up with expeditious clearance of proposals monitoring and a coordinated strategy to tap potential sources.

Holding seminar to improve the foreign investors awareness of the new economic policies are not enough” said a government official. Seminars according to him must be followed up with close monitoring of the outcome. Such follow-up measures have not been taken because there is no central agency given the responsibility of keeping track of foreign investment enquires. The Economic Coordination Unit in the external affairs is organ seminars and reactivating Indian embassies. But there is no folk up measure after the initial enquiry is made

In fact there is no specific department in the government to handle foreign investment proposals says an official. Even proper coordination is lacking as there is no agency which tracks the proposals which are cleared by the foreign investment promotion board (FIPB). This is where the maximum delay takes place. The job of tracking is left to the foreign investor since none of the ministries is entrusted with this task. As a result delays take place in according formal clearance of foreign investment proposals.

This has already disenchanted quite a few prospective foreign investors. Since the big foreign investment proposals will ordinarily be routed through the FIPB such delays have an adverse implication for foreign investment prospects clearance of foreign equity proposals up to 50% by Reserve Bank of India is working smoothly and the approvals under this head every month have been of the order of $40 million. But such clearances are not enough to achieve the goal of $2 billion investment every year.

Apart from that the foreign investor s perception of the Indian economy is also showing signs of subtle change.

The initial euphoria is dragging its feet on the introduction of the exit policy. The foreign companies are quite keen to examine the exit policy the government is planning to introduce before they take decisions on in India The governments tendency to go slow Con this issue has made the foreign investor wary according to some officials.

Even on the introduction of other reforms like those in the financial sector the government has shown signs of slowing down the process.

Article extracted from this publication >> May 8, 1996