An FDI monitor? India mustn’t slip into over-regulation.
Subscribe to enjoy similar stories. As global dynamics shift, does foreign direct investment (FDI) need extra supervision? As reported, India’s government is exploring the idea of an FDI regulatory mechanism for post-inflow review and monitoring. The plan is at a discussion level, so it is too early to tell the shape it will eventually take, should it go ahead, or the details of any rules under consideration.
Its broad inspiration seems to be the existence of such oversight in some other countries. Its intent? To ensure that money flows into India only through legitimate channels and is used strictly for stated purposes. Sure, given New Delhi’s security concerns, illicit inflows and fund diversion for furtive use cannot be given any space by the state apparatus.
As classis bloc-versus-bloc geopolitics returns to haunt globalization, administrations being wary of sneaky operations in the guise of business is a sign of the times. That said, policymakers must move with caution in taking any step in this direction. For all the business rules dropped and eased over the decades, India has been unable to brush off a global reputation for its propensity-to-regulate.
Fresh regulation could send out signals that harden such perceptions. It is well known that India already has regulators for most sectors. While they have a wider ambit and must cover all players in a designated field, perhaps their oversight could suffice, together with extant devices meant for financial hygiene.
We have extensive laws for regulating financial flows in and out of India. Tabs are kept not just on FDI-related movements, but other activities too. As for misuse of funds, the audit systems and other preventives in place for any sizeable business apply to
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