India's Prudent FDI Policy : Attraction for Thai Investments

India's Prudent FDIPolicy Atraction for Thai Investments he Government of India, true to its intent and objective of attracting and promoting foreign direct investment (FDI) not just by non-resident entity or person, India and Thailand have had close religious, cultural and but off-shore entities too, to park their capital trade links over two millennia. in Indian projects and supplement domestic capital, technology and skills, for the much needed accelerated economic growth that their nation of birth needs. It is well known that FDI is preferred to portfolio investment, as in this way the investors can easily get the right towards creating a long lasting bond & interest in the domestic enterprise. FDIPolicy Framework In this respect, India has put in place a policy framework on FDI, which is transparent, predictable and easily comprehensible, embodied in the Circular on Consolidated FDI Policy, to keep pace with the regulatory Through India's 'Look East Policy' in the early 1990s and Thailand's existing 'Look West Policy', both the countries again rediscovered opportunities to strengthen and to further steer it in a manner to deepen economic and trade links to improve By Dr Biswajit Mohapatra can be made by non-residents in the equity shares fully, compulsor1ly and mandator1ly convertible debentures, fully, compulsorly and mandatorily convertible preference shares of an Indian company, through the automatic route or the government route".More particularly. it holds forth that under the automatic route, the non-resident investor or the Indian company is not required to seek any approval from Government of India for the investment as contrary to the prov1sion wherein under the govemment route. pnor approval of the Govermment of India is required. India & Thailand Economic Relations India and Thailand have had close rel1gious. cultural and trade links over wo millenna Through India's 'Look East Policy' in the early 1990s and Thailand's existing Look West Policy', both the countries again rediscovered changes, to be in effect of the rapidly chang1ng prospeCIS Of economiG grOwin opportunities to strengthen und to further steer economic growth circuit in the neighbouring region The varnous entities into which FDI is allowed are a) FDI in an Ind1an Company: Indian companies can issue cap1tal against FDI b) FDI n Venture Capital Fund(VCF); FVCIs are allowed to invest in Indan Venture c) Capital Undertak1ngs (IVCUs) /Venture Capital Funds (VCFs)/ other companies. as stated in paragraph 3.1 6 of thisCircular |4 India-Thailand d) FDI in Limited Liability Partnersh1ps (LLPs). FDI in LLPs is permitted, sub)ect to the conditions that (1) FDI will be allowed. through the Govemment approval route. only in LLPsoperating n sectors/ activities where 100 percent FDl is allowed As such this policy has clearly provided for various provisions for entry roules of this investment. by lay1ng down that invesunents it in a manner to deepen economic and trade links to improve prospects of economicgrOWth Significantly from the beginning of 2003, the bilateral relationship expanded to include secunty and defence cooperation Further there have been efforts to conclude negotiations for final1sing atree trade agreement (FTA) on the bas1s of complementarities of either economies. These developments have been so exc1ting and full olhope that observers have felt encouraged to paint the last two decades as the "golden age of Inda Thailand friendsh1p" It has been further eniplhas1sed that "New Delhi and Bangkok need to further strengthen ther security and delence cooperation given ther geo-strategic compulsions in the region The fact that both the Thai and Indian political leaders are aware of the challenges ahead can be gauged from the numerous exchange visits both at the top level and also at other political levels. The latest in the series was the Visit of Prime Minister of Thailand, Yingluck Shinawatra to India as the Chief Guest at India's Republic Day ceremony in 2012 and the return visit of Indian Prime Minister Dr Manmohan Singh to Thailand, carlier this year, where important matters of cooperation and investments in the field of infrastructure projects, defence, science and technology & trade were discussed. The South East Asian region not only can boast of dynamic economies in the region, it is also one of India's main trading partners, top notch investor and also a rising collaborator in these mutually beneficial new areas such as environment, sc1ence and technology, space and education. In this region, Thailand's position as the gateway to Southeast Asia and East Asia certainly makes Thailand a very important actor. One thus can see significant in Thailand to reach up to the promising sectors and broad-based progress in all areas of their bilateral cooperation. Both the countries have also realised how Thailand can be a strong of Indian economy with their resources as these gestures will add content to the initiatives and dreams ofushering in prosperity and eradication bridge between South Asia and Southeast of poverty, by the respective leaders of these Asia and with connectivity projects like, two countries. Trilateral Highway through Myanmar, they also understand how these developments are vital to their common development. Both the leaders Indian FDI Prudence For facilitation of the private businesses been able to pursue vigorously to enhance their bilateral trade in recent years, with the bilateral trade having been significantly increased up to six-fold over the past decade. The current bilateral trade figure of S7.5 billion is expected to double by 2015. With the conclusion of negotiation on the BIMSTEC FTA. th1s trade is bound to go up much higher. Witb the expanding of manufacturing expressed their determination regarding their from Thailand, India has not only shown the prudence of putting in place, a liberal FDI base amongst Indian industries and their consequent use of new technologies in the Dawei deep-sea port, Special Economic Zone project and development of the lower Mekong region through the Mekong-Ganga Cooperation policy to facilitate FDI in its crucial sectors of economy but also with the recent raising of FDI limits in 12 sectors including telecom and cost of such materials have also come down companies to explore joint participation in the production of quality goods, the availabil1ty of qualitatively superior raw materials and the with increased production. The success of (MGC) initiative, which has been stressed that it will not only connect India to the ASEAN multi-brand retailing and assurance of more investments by foreign companies to be allowed hinterland, but also can bring the much needed synergy to both the econonies and to the region as a whole. through the automatic route, can be said to have periodic negotiations over tar1ff reductions on the items of bilateral trade, and vibrant sectors brought in greater opportunities for investment. of Indian economy continue to attract higher Thai Investments, Indian Projects The desire to transforn both the economies, into knowledge and innovation-based ones, the Indian and Thai premiers have agreed that the shared experience in areas like ICT, biotech and pharma industries could be of mutual benefit. They have emphasised harnessing their existing srengths in the auto sector, with the fulfilment of the promise of Thai investments in the development of Indian infrastructural facilities, viz.,ports, h1ghways and power generation, and electronics. With the signing of India-ASEAN FTA and the impending completion of negotiations and final1sation of the comprehensive bilateral FTA, it's time for the businesses from both the countries to take advantage of the potential for economic growth and invest hugely in the various sectors of ecunomy. While the Indian compan1es have been inching over the tume to invest in the Thai economy, given the fact that the real1sation of bigger profits in Thailand carne earlier, now is the ume also for the businesses region that is sure to increase trade connectivity volume of FDI,and also demonstrates the signs of rap1d absorption and sustanabil1ty. Added to this is the maturity of Ind1a's legal system and its ability to ensure the cause of justice and security to foreign investors concerned lower cost than what it used to be before. The Bilateral Investment Protection growth of India and Th¡iland, and stands to High returns from these investments are guaranteed, given India's business environment. Coupled with this is the proposed land and maritime connectivity to ASEAN & the GMC and shipping of goods and commodities at a far and Promotion Agreement (BIPA) between Thailand and India, signed on July l0, 2000, has been positive step, merits of which are visible loday. If we analyse the figures with regard about the protection of their investment All this tells a story of rapid economc bring accelerated prosperity to the region Sources )Archis Mohan lnd1a and Thaçand Nen Horzons Beckon. http /wwwmea gov inn-foUS Lo bilateral trade between two countries, one can observe that in 1982, while bilateral trade was a mere $59 million, Thailand's exports to article htm?2175 I/lndia +and+ Thailand+ New Horze India amounted to $36 mill1on and its imports 3) Ministry of Commerce, Thailand reprohuc ed from India totalled S23 million. It was the liberalization of the Indian economy in the ns Beckon, Accessed on 19 Juv 20} 2) bid in http Ihwwwindianembassy n th reiationpages php id=98.accessed on 19th Jul 2013 early 1990s that today, the total India-Thailand 4) hup thediplomat com indam de ade 20120126 Irade touched prety at $5.5 billion in 2008 - a five times rise since 2000. Later the total trade figure however reached $5 66 billion for the indio-gets-close-to-ihuiand acessed on 9th Juiv period Jan-Nov 2008, representing nearly 30 percent nerease in trade over the corTespond1ng perod n 2007 Thus India and Thailand have 2013 D Biswut Monathatra s a fa uin memher in the Department of Poitical Science nthe Noth Eastern HlCnersin Shitiong India-Thailand" 5