The Economic Survey 2009-10 tabled in Parliament on Thursday made out a strong case for adopting a liberal foreign direct investment (FDI) regime for health insurance, rural banking and higher education, asserting it could boost trade in services.
“In the case of the services sector, a more conducive environment can be created by liberalising FDI in services like health insurance, rural banking and higher education as FDI inflows and trade in services have a close relationship. Well thought out policy measures would give a boost to the services sector,” the survey says.
Expediting auction of high speed third generation telecom technology, removing 10-year disinvestment clause on FDI in insurance and liberalising foreign investment in the animation sector are the key suggestions of the document. The survey also calls for encouraging venture capital in services and exemption of external commercial borrowings from the withholding tax for financing export-related activities and overseas acquisitions.
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The Survey says that with pick up in export of software and increase in foreign tourist arrivals, the country's services exports are expected to grow in the current fiscal, even as it contracted in April-September 2009-10. Software exports, including those from BPO services, have shown a recovery after a negative growth in the first half of 2009-10. The survey says the agriculture services sector attracted FDI of Rs.6,327 crore in the first eight months of the current fiscal against Rs.16 crore in the year ago period.
FDI in the sea transport sector was up by 918 per cent to Rs.12,983 crore, while in the electrical equipment segment inflows increased by 202 per cent to Rs. 2,724 crore during April-November 2009-10. The sectoral shares of FDI inflows have fluctuated significantly.