BUDGET: MORE آ‘RED TAPEآ’ FOR FOREIGN INVESTORS

Vol 3, PW 3 (03 Mar 99) People & Policy
     

Nothing can better illustrate Indias addiction to Red Tape than the announcement of a Foreign Investment Implementation Authority (FIIA), to work alongside the Foreign Investment Promotion Board (FIPB).

The proposal - made in Yashwant Sinhas budget to parliament on 27 February - is designed to speed up FIPB decisions. In reality it is likely to have the opposite effect.

"There have been complaints about slow implementation of foreign direct investment approvals", Sinha told parliament, "To ensure that such approvals are quickly translated into actual investment inflows and projects, the government has decided to create a Foreign Investment Implementation Authority within the Ministry of Industry, which may also include representatives of State Governments". It is a sad irony that in India solutions to the problems of red tape almost always involve creating more red tape.

No precise details are available of the FIIAs precise role, but its very nature implies close cooperation with the FIPB and foreign companies, many of whom suspect it could end up obstructing proposals, not implementing them. How the government ensures this does not happen is anybodys guess.

A better solution would have been to abolish the FIPB all together and to pass on the responsibility of managing monetary investment in India to the Reserve Bank of India, the central bank. Such a proposal is not as radical as it sounds.

Murasoli Maran a former Industry minister, made the suggestion before he left office with the last United Front government.