Govt begins drafting law to promote and protect foreign investments

The Indian government is drafting a legal framework to promote and protect foreign investments in the country.

Through the law, govt aims to provide legal backing for a stable and predictable foreign investment flow. It will simplify the rights and obligations of foreign investors and eliminate the complicated parts that exist in the current system.

At present, there is no legal framework for foreign investment. Foreign investment is regulated under Foreign Exchange Management Act (FEMA) as part of cross-border capital controls and partly under the Money Laundering Act to ensure inflow of clean money, said ET report.

Earlier, many overseas investors dragged India into foreign arbitration proceedings and local legal disputes after running into issues such as tax claims. The govt does not want to hamper FDI growth prospect through weak legal framework as it is keen to attract more cross-border investments to accelerate job creation and economic growth.

As per AT Kearney’s Foreign Direct Investment, India is among the top 12 global investment destinations and the second most attractive geography amongst emerging market. India has jumped 30 places last year in the World Bank’s ease of doing business rankings.

However, foreign investors, as well as Indian entrepreneurs, still face archaic laws and regulatory red tape. Clarity is still a major issue in absence of a legal framework. Many entrepreneurs including erstwhile Infosys board member and prominent angel investor Mohandas Pai had voiced his concerns over exorbitant taxation levied on angel funding.

Overseas investments into India stood at $35.94 billion during April-December 2017, according to the Department of Industrial Policy and Promotion (DIPP).