The intended effects of stemming the rupee’s slide and spurring income growth through the government’s latest reforms initiative to raise foreign direct investment (FDI) caps in a range of sectors and simpler entry norms in others may take some time to kick in.
The fresh policy pronouncements, however, are likely to soothe frayed nerves of investors who fear that the government is more likely to be focussed on political risk management rather than economic revival.
“The initiatives taken yesterday were very important policy initiatives in a broad direction,” Planning Commission deputy chairman Montek Singh Ahluwalia told ET Now.
“But it would be wrong to regard them as a design to create a greater inflow in the short-term. This is really a continuation of the policy that India is open to FDI.”
The measures are likely to boost investor sentiments in the immediate term.
“Even though in some of the sectors, allowing FDI under the automatic route will not have any impact on the inflow of FDI, but it will definitely have a positive impact on the sentiments of foreign investors,” said Dev Raj Singh, ED, tax and regulatory services, EY, a global professional services organisation.
Business leaders welcomed the FDI policy overhaul, but cautioned that more needs to be done.
“Recent amendments to policies are somewhat responsible for the slump in FDI inflows. A stable policy regime is essential to attract continuous investment flows,” CII said.