reforms were a landmark event for foreign investors discouraged
by the countrys
notorious policy paralysis. But in-house
announcement of FDI reforms is a sign that India is
reopening to foreign investment, counsel warn that
clients are concerned about changes
following the announcement.
foreign investors were surprised when the Indian government
announced the opening of FDI in multi-brand
retail, then retracted it after political
Trilegal partner Saurabh Bhasin said,
are positive feelings that the government is finally making
important decisions on much-needed reforms, theres some
level of cynicism and anxiety in seeing how these reforms play
out, he said.
private equity lawyer agreed that the reforms had received a
positive response, and added that the easing of restrictions in
the retail and airline sectors is especially significant
because both will especially benefit from FDI.
But the reforms
especially FDI in multi-brand
retail are politically contentious.
The counsel noted thatopposition in the country may cause a
rethink, if not on the fundamentals of the policy itself, then
on some of the details around it.
will tell whether the implementation is effected in such a way
as to give certainty to investors that their investments will
not be subject to policy change or amendment going forward
as such, we can expect investors to be circumspect in
the way they take advantage of these
reforms, said the source.
But investors are
already concerned with some aspects of implementation. The
Indian government is requiring foreign investors in multi-brand
retail to invest
$100 million in back-end infrastructure.
investors have complaints about the high cost of opening in
India, Bhasin stressed that there are advantages:
while multi-brand retailers must form joint ventures with
Indian companies with a 51% ownership cap, they can fully own
their back-end infrastructure.
International companies were
always allowed to have 100% ownership in back-end
infrastructure, such as cold storage, but no one put money into
it before because they couldnt have a front-end
presence, he said.
Bhasin hoped that
the FDI in multi-brand retail reforms will spur public-private
partnerships, and may mean that the government takes a closer
look at much-needed infrastructure reforms.
agree that the Indian government must do more to continue
encouraging foreign investors. The counsel recommended that it
continue to take steps to reduce the uncertainty of the General
Anti-Avoidance Rules (GAAR).
Aside from GAAR,
the lawyer suggested further relaxation and clarification of
FDI laws. Most critically, the government must focus on reform
to resolve inter-governmental agency disagreement on
fundamental FDI issues, which would result in confidence around
the investment environment and a reduction in policy