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World knocking on India's door

As the finance minister unveils his budget, foreign investors wait to see if he will remove barriers to hot sectors, says Anto Joseph

Sunday February 26, 2006
The Observer
When Palaniappan Chidambaram delivers his budget speech on Tuesday, global markets will pay great heed. For the suave, Harvard-educated finance minister of India, the 2006-07 budget is more onerous than in previous years, with the country in the midst of an economic boom, galloping stock markets and frenzied growth in infrastructural development. Foreign investors eagerly await his proposals; will India, the fastest-growing democracy, dislodge all entry barriers for them and open up 'hot' sectors for 100 per cent foreign direct investment (FDI)?
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Chidambaram, one of the architects of India's economic reforms under the late Prime Minister Rajiv Gandhi, would have liked to open up retail, insurance and banking for 100 per cent FDI, but opposition from the parties of the left, as well as some in his own party, has so far prevented that. So while preparing the ground for such an eventuality in the near future, his budget is likely to focus on supplementary measures to encourage FDI, say government officials.

According to a study by Grant Thornton India, 2005 saw significant FDI growth in India, and it was a bumper year for mergers and acquisitions, with 467 deals compared with 360 in 2004. India is now seeking to increase its FDI to $10bn (