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India’s New FDI Rules Could Derail Indian Startup Economy

India’s New FDI Rules Could Derail Indian Startup Economy

With over $10 Bn planned Chinese investments, will the latest FDI rule backfire given the state of the economy?

FDI aims to bring in new technology as well as capital so the policy should be structured accordingly, said former FinMin official Subhash Chandra Garg

At least 81 Chinese investors have invested in 144 Indian startups in the last six years as per DataLabs by Inc42 analysis

‘Minimum government, maximum governance.’

Even before Narendra Modi became the prime minister of India, he had announced this as his mantra for making policies. However, despite creating a slew of task forces, working groups across the ministries, drafts, barring few instances, the government has failed to meet the policy requirements at large and their transparent implementation across the sectors. This includes drones, ecommerce, data privacy, crypto, foreign direct investments and so on.

Of course, there have been some significant developments on the policy front. Besides Startup India policies, GST is one of the biggest policy reforms which changed the way India used to collect taxes. In many of these sectors like drones, data privacy, the government in fact had to start from scratch and hence the delay could be understood. However, in most of the cases, it’s the policy flip-flops, back and forth moves which have caused discomfort among investors and other stakeholders, poking uncertainty in terms of policies from the government end.

Take FDI for instance, where the Modi government has been arguably doing better compared to its predecessors when it comes to FDI reforms. The then finance minister Arun Jaitley in his budget speech of 2017-2018 had said, “Foreign direct investment (FDI) increased from INR 1,07,000 Cr in the first half of last year to INR 1,45,000 Cr in the first half of 2016-17. This marks an increase by 36%, despite a 5% reduction in global FDI inflows.”