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India to relax business rules for more FDI
By agencies
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Friday, 06 May 2005, 19:30 IST
NEW DELHI:India will introduce Chinese style special economic zones in an attempt to attract foreign direct investment.
The SEZ bill, which goes before parliament, is intended to extend to India's export-oriented manufacturing companies the fiscal and labor advantages that have been enjoyed by the country's world-class information technology sector.
Businesses setting up in SEZs will be entitled to a 15 year tapered tax exemption and, subject to decisions taken at state level, also be allowed to circumvent India's complex and restrictive labor laws. These laws prohibit companies with more than 100 employees from sacking workers without state permission and from employing contract staff for more than three months without offering them permanent positions.
Many foreign companies view the laws as a deterrent to setting up or expanding operations in India, which receives only about a tenth of the foreign direct investment that reaches China.
Reserve Bank of India figures showed FDI rising at about 20 percent to $4.1 billion in April-December 2004 compared with $3.4 billion in the same period of 2003, a movement the bank attributed to an improved "enabling environment."