Fdi Caps in India

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Date Submitted: 08/01/2010 02:41 AM

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Should India further liberalise FDI rules in sectors with investment caps?

What is the reason behind liberalization?

How successful have been the previous spate of liberalizations?

Why should liberalization be undertaken

Nearly two decades of liberalization, several progressive policies aimed at market integration, the debate still rages on as to how much should be the limit for allowing foreign players to enter the domestic market. As opposed to the idea of opening of the flood gates of the economy at one go, what took place was a gradual liberalization in different sectors of the Indian economy but not without their fair share of controversies and mis-directions. A major move was made in 2008 when India raised caps on foreign investment in civil aviation, refineries, some mining of minerals, and commodity exchanges even to the extent of allowing 100% FDI in ….

In the wake of the discussion paper issued by the Ministry of Commerce and Industry to test India’s inclination towards opening up the much guarded retail sector to multi-brand outlets, the … has been freshly stirred. The rising food prices have apparently been the trigger to instigate further discussions on this issue. It is expected that one way to tackle food price inflation would be to modernize the post-harvest logistics and supply chain, and retail can contribute to that. Retail giants like Walmart and Carrefour are eyeing the developments eagerly as retail sector in India is largely closed, with 51 percent foreign direct investment allowed only in single-brand retail and multi-brand retail restricted to cash-and-carry outlets and Asia’s third largest economy is touted as the next big retail destination.

However, before taking such giant steps it would be wise to analyze what the previous spate of liberalizations in different sectors have contributed to the sectors in specific and the economy in general. Also, the fact should be taken into account that despite having a much liberal FDI regime...