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India moves to fast-track US investment ahead of Obama visit

Slum Developer Omkar Realtors & Developers Pvt. Managing Director Babulal Varma Portraits And Views Of The Company's Cresent Bay DevelopmentSlum Developer Omkar Realtors & Developers Pvt. Managing Director Babulal Varma Portraits And Views Of The Company's Cresent Bay Development
Modi wants U.S. investors to make Indian cities smart and green.Photograph by Dhiraj Singh — Bloomberg via Getty Images

India’s government announced plans to make U.S. investment in the country easier, as part of its broader plans to break down the country’s notorious bureaucratic obstacles to business.

The New Delhi government said it will form a new panel to fast-track investment proposals from the U.S. to “identify bottlenecks faced by the U.S. investors…and address them in consultation with all other agencies and state governments concerned.”

The announcement appears to build on a largely successful visit to Washington earlier this year by Prime Minister Narendra Modi, in which Modi promised to make his country an attractive destination for inward investment, especially in manufacturing. Like many Indian politicians, Modi is frustrated at the degree to which India’s poor infrastructure and bureaucracy have led foreign investors to favor China over the years.

Modi’s visit had paved the way for a much bigger breakthrough in economic relations last month, when Washington dropped its objections to India’s food subsidy policies, unblocking a major deal on boosting global trade that was all but agreed last year in Bali by the World Trade Organization.

It may be a moot point whether what India needs is yet another inter-departmental panel aimed at “helping” inward investment.

However, Wednesday’s announcement is consistent with Modi’s plans to create a network of 100 “smart cities” across the sub-continent in the next six years, singling out the priority of promoting “green, advanced and smart technologies by U.S. companies in India.”

The announcement comes a month before President Barack Obama is due to visit India.

Separately, Modi’s government also announced Wednesday a general easing of the rules for foreign investment in its construction sector, Reuters reported.

Under the new rules, foreign companies will be allowed to invest in medium-sized developments with a minimum-built area of 20,000 square meters, as opposed to a current minimum of 50,000. The minimum capital investment has also been halved to $5 million, Reuters quoted the government’s statement as saying.

In addition, investors will be able to exit projects either on completion, or after the development of essential related infrastructure such as roads, street lighting and water supply. Currently, investors aren’t allowed to repatriate profits for two years.

The new rules will only go some of the way to making investment easier, as the approval for land development projects generally lies with state and municipal governments.