India has made tremendous progress in building a policy environment to encourage investment. As a result, the country's economy is growing more rapidly and FDI inflows have accelerated impressively. However, investment remains insufficient to meet India's needs, particularly in infrastructure.

Current efforts to strengthen and liberalise the regulatory framework for investment need to be intensified and India's well-developed economic egislation implemented at an accelerated pace both at national level and right across India's states and union territories.

India has made tremendous progress in promoting investment India has made impressive strides in building a policy environment to encourage both domestic and foreign investment, in particular to attract foreign direct investment (FDI) and facilitate outward investment, as evidenced in this study. This progress is an integral part of the market-oriented reforms which have since 1991 set the scene for a shift to a consistently higher rate of real annual GDP growth than the country has experienced in its recent history.

The ''licence raj'' has been largely dismantled. Restrictions on large-scale investment have been greatly relaxed. Many sectors formerly reserved to the public sector have been opened up to private enterprise. Import substitution and protectionism have been replaced by an open trade regime. Sectoral restrictions on FDI have been progressively removed and foreign ownership ceilings steadily raised. FDI approval procedures have been greatly liberalised.

Foreign exchange restrictions related to investment have been relaxed. Experimental economic zones such as the Special Economic Zones have been established to test investment liberalisation measures. At the same time, other elements of the business environment that have an impact on investment have improved. The legal framework for intellectual property rights (IPR) protection has been greatly developed in the past two decades and enforcement has been strengthened. A non-discriminatory Competition Act is being gradually put into effect. India's tax system now treats foreign-owned companies on a par with domestic firms. The corporate governance framework has improved, taking advantage of international norms. The government is striving to increase investment in human capital.

These reforms are expected to last. India has a history of democracy and the rule of law which provides a firm basis for the development of a sound legislative and regulatory environment for investment, incorporating good practices from other jurisdictions, generally on the basis of internationallyrecognised standards.