Parliament panel expresses concerns over dip in manufacturing sector FDI

A parliamentary panel on Wednesday expressed concerns over decline in foreign direct investment (FDI) in the manufacturing sector and recommended to address these issues to make India an attractive destination for investments.

The Department-Related Parliamentary Standing Committee on Commerce said the FDI equity inflow in manufacturing is declining and the sector's share in the total FDI inflow in 2018-19 was around 23 per cent "which is very low". It said the "low inflow of FDI in the manufacturing sector defeats the very purpose of Make in India scheme".

It recommended the commerce department to take concerted efforts to increase the share of manufacturing sector in FDI inflows. It said that in the past five-and-a-half years (April 2014-September 2019), India received FDI inflows worth USD 319 billion, which is 50 per cent of the total FDI inflow (USD 642 billion) in the past over 19 years since April 2000.

It also asked for fast disposal of 51 pending cases of FDI proposals.

"The committee, while appreciating the liberal and investment-friendly policies adopted by the government, recommends to take necessary precautions/ steps to ensure that the liberal policies are not exploited by some unscrupulous investors and institute a stringent mechanism to check the misuse of FDI for routing black money in the guise of FDI," it said.

Besides, the report stated that a large chunk of FDI inflow is captured by a few states while majority of them witness a minimal inflow of FDI. It recommended the government to take necessary steps to increase the inflow of FDI into the lean states to ensure balanced growth so that there is no regional disparity in development.

Further, it asked the department to be vigilant about the domestic sourcing norms and ensure that they are strictly adhered to by the multinational corporations so that the intended benefits are accrued to the target groups.

"The committee recommends to address the concerns raised by the domestic retailers and indigenous traders in a structured manner through its retail trade policy which is supposedly under preparation," the report added.

The report also said necessary steps need to be taken to ensure that the liberalisation of the coal sector provides the required impetus to the sector.

It called for concerted efforts for revival of the industrial sector with focus on mining, manufacturing and electricity sectors given their importance in the economy and to address declining capacity utilisation of the manufacturing sector considering its impact on investment and job creation.

On the proposed new industrial policy, it suggested for finalising the policy at the earliest in tune with changing global scenario.

On intellectual property rights, the committee stressed the need to further reduce the time for examination and disposal of patents to match the international standard, create awareness among various stakeholders and fill the sanctioned posts of patent examiners and controllers at the earliest.

Taking note of the World Bank's Doing Business Report, 2020, which ranks India at 63rd among 190 countries, it said sustained measures need to be taken for further improvement.

Further, for start-ups, it suggested to increase registration of start-ups in Government e-Marketplace portal, facilitate establishment of start-ups in those states with dismal record, address the issue of insignificant drawing of funds from the Fund of Funds Scheme and operationalisation of Credit Guarantee Scheme to ease the availability of credit.

"Expressing concern over the delay in payment by the PSUs (public sector undertakings) and the government departments to the start-ups, the committee recommended to increase procurement and payment of dues within a stipulated time period," it said.