Don't change FDI policy, Sharma's advice to his successor

Worried that the new government might amend the foreign direct investment policy especially in retail, Commerce and Industry Minister Anand Sharma has prepared a ‘handover note’ advising his successor to ensure ‘stability’ of the FDI rules.

Sharma proposes to pass on the ‘handover note’ to his successor, which as per the poll projections is likely to be from Bharatiya Janata Party-led National Democratic Alliance.

The note assumes significance as the BJP is against allowing foreign direct investment in multi-brand retail, a proposal which was pursued by the Congress-led United Progressive Alliance government.

The note has also underlined the need for carrying forward the trade normalisation roadmap with Pakistan.

An official said that Sharma is following this step in tradition with India's first prime minister Jawahar Lal Nehru to brief the incumbent minister himself about the ministry.

"The note mainly highlights the challenges and the new initiatives of the ministry," the official added.

The note also talks about free trade agreements, widening trade deficit with China, challenges being faced by Indian exporters and developments at the World Trade Organization.

About FDI, the note said that in the last five years, India has pursued a liberalised FDI policy and opened up crucial sectors of economy like aviation, retail and telecom.

"It is imperative for me to underscore that foreign investors need a reassurance on the stability and predictability of foreign investment regime in India.

This would not only be in India's national interest but it has been a healthy tradition of our democracy.

"I hope that you will retain a liberal economic outlook and view FDI as a source not only of precious foreign exchange but of technology, investment and jobs," it added.

On trade relations with Pakistan, Sharma has said that normalisation of economic relations with Pakistan lies at the heart of a peaceful South Asia.

With regards to the free trade agreements, he said the new government should proceed with ‘great prudence’ recognising the concerns of domestic industry.

The industry has raised concerns over FTAs that such pacts are impacting domestic manufacturing sector.

"Negotiations have commenced for a Regional Comprehensive Economic Partnership which will have in its embrace 10 countries of ASEAN, India, Japan, Korea, China, Australia and New Zealand . . . But we would need to be cautious in our negotiating strategy especially given our larger trade deficit with China," the note said.

Pointing out challenges, he has said that India needs to address the growing trade deficit with China and creating competitive environment for exporters.

On WTO, the note says the post-Bali work programme would require close coordination with India's coalition partners.

Image: Anand Sharma