Centre advises states to look at progressive counterparts

States need to take initiatives to complement centre's efforts

Adopting strategies followed abroad for attracting investment is now a thing of the past.

The Centre has advised the laggard states to look at their more progressive counterparts to adopt best practices for attracting foreign and domestic investment.

"The government has taken several measures to facilitate foreign investment into the country. However, the states, too, have to take initiatives to complement the Centre's efforts. States like Delhi, Karnataka, Andhra Pradesh and Gujarat are the top five recipients of foreign Direct Investment (FDI) in the country, attracting over 50 per cent of the total FDI inflows. We have asked other states to emulate their model," a senior official told Business Standard.

"Several northern states are lagging behind," an official said, adding that the Centre would also ask state governments to rationalise their duty structure to reduce costs for investors.

Official data for the period April-September 2004 indicates that the top five states garnered around $ 1.25 billion of the total $ 2.38 billion FDI inflows into the country.

"The central government has introduced tax holidays in several sectors to make them attractive for investment but several duties at the state level are still too high. Stamp duties for instance vary from state to state. All these add to costs for the investors," officials said.

FDI inflows have posted an impressive growth of 68 per cent during the first six months of the fiscal 2004-05 at $ 2.38 billion as against $ 1.41 billion received in the corresponding period of the previous financial year. Despite this increase, India still lags far behind China which attracts more than $ 45 billion in FDI a year.

Officials pointed out that the present thinking in the government is that it has to look beyond hiking FDI caps to attract more FDI. China has far more restrictive investment norms than India and despite this it attracts more FDI.

Existing investment norms in China state that the establishment of enterprises with foreign investment is subject to a project-by-project examination, approval and registration by the government.

China also requires investors to submit the contract and articles of corporation to the examination and ratification department, the official said.