Keep tab on FDI: Panel

The Parliamentary Standing Committee on Commerce has asked the government to keep a close watch on the areas in which foreign direct investment (FDI) is being made, and keep a tab on the investors in the interest of internal security.

The committee, headed by Murli Manohar Joshi of the BJP, has also said financial sector reforms should be expedited since the basic malaise behind stagnation of FDI inflows is the plethora of taxes at the central and state levels, different import duty rates and higher interest rates on loans.

Terming the government's contention that FDI inflows have registered a consistent growth except for the period 2001-02 as "unacceptable", the committee said the interaction with the representatives of the Department of Industrial Policy and Promotion and the RBI had shown that a proper mechanism to monitor FDI inflows was not in place.

The committee recommended close linkages and synergy among the various ministries, the Reserve Bank of India and the states for closer monitoring and latest information about the FDI inflows.

Stating that the tax laws needed to be rationalised considerably, the committee said the government should carry out regular studies regarding the effect of progressive reduction in Customs duties in respect of inflows of FDI in the country.

It also said the government should put in place a proper policy on the setting up of Special Economic Zones as they have the potential to attract FDI and ensure efficient mechanism for proper implementation of the policy with respect to SEZs.