Policy inconsistencies have shaken investors' confidence: Unctad

UN body claims points to report that claims FDI has dropped 13.5%, from $31.5 bn in 2011 to $27.3 bn in 2012

The United Nations Conference on Trade and Development (Unctad) today said the Indian government’s move to amend the Income Tax Act, 1961, with retrospective effect announced last year has shaken investors’ confidence in the country.

Unctad’s secretary general Supachai Panitchpakdi told Business Standard that other 'policy inconsistencies', such as the proposal to introduce General Anti-Avoidance Rules (GAAR) to check tax evasion have also not found favour with investors. He was speaking on the sidelines of an event organised by the Aspen Institute here today.

This, he said, in the context of a recently launched report which indicated that foreign direct investment (FDI) in India declined by 13.5% in 2012. FDI inflows into India declined from $31.5 billion in 2011 to $27.3 billion in 2012, Unctad said in the report on global investment trends, which was released in January.

“Predictability of economic policy platform and I think there seems to be some uncertainty in handling certain cases in India has given rise to some major inconsistencies. So this has probably confused investors or made them think twice before coming to India. So we can see the decline in FDI,” Panitchpakdi said.

He also referred to the government’s suspension of its decision to allow FDI in multibrand retail trading as a major party spoiler, especially at a time when India required foreign investments the most to sustain higher rate of growth.

“This back and forth in retail sector was not good. I can understand the problems on retail investment. But I am very supportive of reforms. The ultimate aim of the Indian government should be welfare of its people or consumers,” Panitchpakdi said citing the example of Thailand from where he hails where permitting FDI in multibrand retail have not made impacted the smaller shops.