Over the last decade, liberalisation has improved the climate for investment in India. However, the world has moved on and we are perhaps not keeping pace. The biggest frustration for potential investors into India is the bureaucracy.
It owes its origin to the colonial period when our rulers did not trust Indians and made rules for each eventuality. To create and administer such a regulatory regime, they created a bureaucracy, which has survived even today and has become more 'all pervasive'.
If you ask any investor -- Indian, NRI or foreign -- their biggest frustration about investment is the bureaucracy. Let me give you some examples from personal experience.
Even in sectors where 100 per cent foreign ownership is allowed under the so called automatic route, an NRI OCB has to get FIPB permission to purchase even one share in an Indian company, even if the owners of the shares are willing to sell at an agreed price.
Curiously, if the same NRI OCB were to subscribe to the equity of the company, there is no need to obtain FIPB approval. FIPB is supposed to meet once a week. If the finance secretary who is the chairman is not available, the meeting is adjourned to the following week.
Routine and often procedural questions are raised which the company has to answer. It leads to further delay. Minutes of the FIPB meeting have to be approved by the minister. If he is on tour, the minutes are delayed. Once the minutes are approved, the FIPB informs the investee company.
But the saga does not end there. The company has then to apply to the Reserve Bank of India for its approval for receiving the foreign exchange into the country. They also raise their own questions. New RBI rules do not allow anyone to go and meet the officer concerned to deal with any queries.
Therefore, all queries have to be dealt with through correspondence. In the RBI it takes 10 days for a file to move from the reception to the section dealing with FDI, which is located on the eleventh floor of the same building!
Due to all these delays, typically it takes a minimum of four to five weeks to get RBI approval. The whole process between FIPB & RBI can take between three to four months even in a normal case. In the interim period, market conditions could also change.
Let us contrast this with other countries. USA is the richest country in the world, and unlike India, it could possibly do without FDI. Yet USA is the biggest recipient of FDI in the world.
When I had to invest in a company in the USA, I had only to agree to the price per share with the company concerned and arrange to remit the money to the company's account. The company then issued the share in my name.
There is no regulatory hurdle at all. Why cannot we in India allow such simple procedures at least in sectors in which FDI is supposed to be allowed under the so-called automatic route? Why cannot we simply abolish FIPB and the RBI procedure? Why not allow commercial banks to verify and receive inward investments as is done in other countries?
After all, the money is coming in and not going out. The seller or issuers of the shares are better judges of the transaction than the bureaucrat sitting in Delhi.
Indian bureaucracy acts as a deterrent not only to investment but also to professionals who have to travel. India has established a global reputation in IT services due to the hard work and competence of our IT professionals.
Many of them have to travel abroad. To them a laptop is as essential as a pen is to a writer. Yet in this day and age, Indian customs insist on every professional to have his laptop details entered in his passport when he leaves the country and to have it verified by the customs official when he returns.
Having to queue up and show the serial number, etc. and get the passport stamped on both the outward and inward journeys is an unnecessary harassment.
What does it matter to the country if an IT professional takes his laptop in and out of the country as he does with his watch? Surely the finance ministry can abolish this harassing procedure!
Every visitor has to get a visa. While companies can employ travel agents, individual visitors have to go to the Indian embassy or consulate to get a visa. Recently, I had the following report from a Swedish visitor who wanted to link Indian IT companies with Swedish customers.
"When I entered the Indian embassy in Stockholm seven years ago, it struck me that it was similar to the embassy of one of the former Eastern European countries during the Communist era. The situation at the Indian embassy was not very different this year.
"When I entered the embassy nobody greeted me, just looked glaringly at me. Then I asked if they could help me with the visa. The man answered 'No! that department was open only until noon.' It was about 1:00 p.m.
"I had to beg of him a couple of times before he could show me where the papers that needed to be filled in were. Of course he would not accept the papers, although I did fill in everything and had a photo.
"Next day, I went before noon. At the desk, the same guy, who told me the day before that I was too late, took my papers and passport and told me to come back between 3:00 and 5:00 p.m. He said not one word extra.
"Fortunately, there was a very friendly young woman sitting behind the reception desk who offered to help. She was great and even spoke Swedish.
"I think that the Indian embassy must show a different attitude towards visitors. Very often the embassy is the first impression of the country!"
This is not an isolated instance. Our embassy staff in foreign countries, especially at the lower level, have to be trained in the need to make business visitors and tourists feel more welcome. The typical 'babu' attitude cultivated in one of the many Bhavans or Blocks in New Delhi is unsuitable in London or New York or Stockholm.
Getting a visa is only the first step. Then comes the problem a visitor confronts on arrival and departure at our airports. Visitors and nationals all have to queue up in the same stream. This results in long queues especially at the time of Haj and the holiday season.
Even in a country like the UK, which is the potential target of would-be immigrants and asylum seekers from all over Asia and Africa, the procedure is much simpler than ours. There are separate queues for nationals and foreigners.
Foreigners have to fill in a simple landing card, which gives the address where they can be reached if necessary -- a procedure followed in several places in Asia e.g. Dubai, Singapore, etc.
The introduction to India will be much more pleasant than the present one of having to queue up in humid, badly lit arrival halls before confronting a usually grumpy immigration official.
On departure from India, one has to fill up an Emigration Form with pieces of data, which are already on one's passport viz. name, date of birth etc.
If a person is leaving the country, why cannot we allow him to go with a scrutiny of the passport and a stamp on it? Why have all these hassles of forms and stamps? Even in countries like the USA and UK that have more reasons to be wary of foreigners, the immigration authorities do not bother about people leaving their country.
One can simply walk through to the departure gate at Heathrow with a Boarding Pass. It is up to the airline to make sure before issuing the Boarding Pass that the passenger has a valid visa. Some simple administrative steps can make our country a more attractive destination.