The Commerce and Industry Ministry has cautioned the National Security Council headed by the Prime Minister Manmohan Singh that any tweaking of the current foreign investment policy regime may adversely affect the flow of foreign direct investment (FDI) into India.
The ministry says current over-arching powers vested with the Centre are enough to take care of potential threats. It is particularly against any plan for across-the-board scrutiny of FDI proposals or any distinct legislation linked to security aspects governing overseas investments.
The move comes in the wake of reports suggesting extraordinary scrutiny of companies from China and West Asia, which often are scoured by security experts either in relation to domestic security concerns or links with extremism.
Stating that it does not foresee any security threat from the long-term inflow of foreign resources and capital, the ministry said in a recent letter to the NSC secretariat, “Inimical forces can in reality do find less expensive ways than FDI to try and pursue their objectives.”
The NSC has proposed setting up of a risk management system (RMS) that that would regulate and monitor foreign investment into the country based on parameters such as source of investment, nature of activity and issue of visas to foreigners.
The NSC has also sought comments from ministries about an over-arching umbrella legislation to govern FDI into India.
Any review of the existing system, it said, may be undertaken only after a period of at least two years.
“India is at a development stage where it requires large investments across all sectors of the economy including infrastructure and is finally emerging as one of the most attractive and investors friendly destination of the world,” the letter said.
FDI aggregated to $19.38 billion ( about Rs 89,000 crore) for the April-November period of the current fiscal, a touch lower than $ 19.79 billion ( about Rs 91,000 crore) received last year during the comparable period.
“Any proposal for re-engineering the extant policy regime would have to take this reality into account,” the ministry said.