The UPA Government has given in. Bowing to pressure from the Left and other sources, it has decided not to impose any special security filter on foreign direct investment (FDI) from China, which it had intended to do earlier.
Even the Commerce and Industry Ministry does not favour the National Security Council (NSG) proposal to subject Chinese investment to greater scrutiny than investment from other countries.
"There is no question of any country specific (read China) security scanner for FDI," said Minister Kamal Nath. "We welcome foreign investment from China. We have a lot of synergy with them".
The statement assumes significance as it coincides with arrival of Chinese President Hu Jintao in New Delhi on Monday.
"There is nothing wrong in security related guidelines on foreign investment, ” Nath clarified. The minister pointed to regulatory laws prevalent in the European Union and the United States to vet investment proposals from the security angle. “What is wrong in such a proposal?” he questioned.
However the Government is yet to decide whether the security-related scrutiny of FDI proposals would be made within the existing legal framework or another legislation will be brought in as proposed by the NSG.
“Any investment proposal vetted from the security angle will be done in a very transparent way. We are examining whether a new legislation is needed. We will take a decision shortly” said Kamal Nath.
He hinted that the all-pervasive new security cover would be in place to vet FDI proposals in two months from now.
Answering a query, Kamal Nath stated that no foreign trade agreement with China was on the cards during President Hu's visit. However, he did not rule out the possibility of India entering into a comprehensive economic cooperation agreement (CECA) with China in future.
Meanwhile, Kamal Nath was confident of meeting the target of mobilising FDI worth US $ 9 – 10 billion (Rs 40,500 crores) in the current fiscal. FDI inflows have touched a record US $ 4.4 billion in first six months of current financial year, registering a 100 percent increase over US $ 2.2 billion reported in April – September, 2005.
Another US $ 3 billion is expected to be re-invested by the foreign players out of the profits made and retained by them without repatriation during 2006-07.
This is against the FII’s portfolio investment in the stock markets that is expected to touch a whopping US $ 15 billion in 2006 as against US $ 11.5 billion in previous year and US $ 7 billion in 2004.
He also pointed to the 12 percent growth in manufacturing growth in first six months owing to double-digit growth registered by 10- 17 groups of industrial segments. Kamal Nath highlighted the fact that eleventh plan target of achieving 9 – 14 percent growth in manufacturing has been achieved in terminal year of tenth plan itself.
· US $ 9 – 10 billion foreign equity flow target to be met
· Seven proposals for FDI in retail cleared
· Chennai tops FDI growth in first six months at US $ 437.3 million
· Singapore displaces US and EU as top foreign investor with US $ 481.7 million
· Services, electrical equipment, telecom, transport and fuels fuel FDI growth
· In September 2006 alone FDI touch a staggering US $ 916 million