Prime Minister of India - Dr. Manmohan Singh

Investment Commission presents report to PM

The Prime Minister had constituted an Investment Commission under the Chairmanship of Shri Ratan Tata to recommend policies that the Government can take up to step up the rate of investment in India. The Commission has presented a report.

The Commission has identified the following as major impediments to higher investment in India:

1. Investment restrictions and/or entry route barriers in several sectors of significant investment potential/investor interest

2. Absence of long-term policies, non-implementation/ reversal of policy and breach of contract

3. Lack of level playing field -especially in sectors with PSU dominance

4. Inflexible labour laws

5. Many agencies engaged in doing the same or similar activities relating to FDI

6. Bureaucratic delays, discretionary interpretation, vested interest, bias and subjective practices (In particular, approvals from Ministry of Environment Forests seen as a major impediment in terms of inordinate delay).

7. Centre-State divergence on investment related policies

8. High cost of entry, transactions and exit; ineffective dispute resolution

9. Poor infrastructure

10. Priority Sectors are not clearly identified/specified.

Based on the investment goals and the identified impediments, a set of broad recommendations have been made which could facilitate and improve the investment climate. These are listed below:

1. Remove/reduce restrictions on sector caps and entry route on all sectors other than those considered "strategic". Permit "automatic route" for all investments within the sector cap.

2. Provide labour flexibility by removing the requirement of State Government approval from Chapter V -B and permitting Contract Labour in all areas.

3. Promote SEZs for key sectors. Redefine norms on the basis of scale, investment quantum/levels and sector focus. Separate the Developer of the SEZ from the Occupants.

4. Provide a level playing field in sectors with PSU dominance -establish an Independent Central Regulatory Commission headed by a Chief Commissioner appointed by the President or the Prime Minister with independent Regulators for each regulated sector.

5. Provide long term visibility and consistency of policy.

6. Improve business environment -reduce number of procedures and approvals; make all approvals time bound and non-discretionary.

7. Eliminate scope for discretionary interpretation to step corruption -update key laws and statutes using Study Groups or Committees (with Government and Industry participate) to reflect this.

8. Establish effective mechanisms to resolve center-state issues -establish an Empowered Committee framework (as done for VAT implementation) for implementation of key policies that require Centre-State cooperation such as Power sector reform, Labour law reform, Urban Land reforms (including ULC Act), APMC amendment.

9. Other Recommendations

v Create a special high level fast track mechanism for priority sector projects

v Enhance availability of skilled manpower for sectors like Biotechnology, Automotive Engineering, Textile Engineering, IT -establish new private educational institutes with international collaborators

v Facilitate upgradation of Urban infrastructure by having a directly elected Mayor in key cities -as is the case with major cities in China and the USA

v Establish a single point contact at the Centre to implement policies and procedures to enhance investment as well as facilitate high value projects across Ministries and Departments.