Is foreign investment on the brink of a rebound? Lawyers are optimistic, Rebecca Abraham reports

On 13 August, India’s minister for commerce and industry, Nirmala Sitharaman, told parliament that the government does not “entertain FDI [foreign direct investment] in multi-brand retail”. While this was in the Bharatiya Janata Party’s manifesto for the recent general elections and came as no surprise, this was the government’s first statement on FDI in this keenly watched sector. More importantly, it is symbolic of the government’s continuing ambivalence about foreign investment and as such typifies the challenge of investing in India.

For even though the country received FDI of US$348.41 billion from August 1991 to May 2014 – a figure supplied by the minister to parliament – more foreign investment is needed. Yet the political, legal and regulatory complexities of investing in India may be prompting foreign investors to look elsewhere.

More to be done

Plans announced in July to raise the cap on FDI in the insurance and defence sectors to 49% are steadily becoming a reality. However, as management and control are to stay in Indian hands, lawyers within India who focus on these sectors are sceptical about investor interest (see Dangling a carrot in the July/August 2014 issue of India Business Law Journal). The railway infrastructure sector, for which on 6 August the cabinet approved 100% FDI, may prove to be more attractive.

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