India Makes Plans to Adopt International Industrial Coding System to Attract FDI

August 6, 2014 Posted by India Briefing Reading Time: 3 minutes

DELHI – The Indian government plans to adopt the international industrial coding system to simplify and clarify policy and economic information for foreign investors as part of its plan to overhaul foreign direct investment policy under Modi’s administration.

By replacing the current National Industrial Classification (NIC) 1987 system with the 2008 system, economic data and policy can be synchronized with international standards, making FDI policy easier to navigate for foreign investors.

The move is in line with the Modi administration’s plan to simplify business processes and improve the ease of doing business in India to boost foreign investment. India is currently ranked at 134^th place out of 189 global economies, according to the latest World Bank report.

In the two months since coming into office, Modi’s administration has announced multiple policies to reform India’s economy, including raising the ceiling for FDI in insurance to 49 percent, up from the current 26 percent. The administration has also sought to simplify and speed up administrative processes to improve the ease of doing business in India. For instance, firms can now register for insurance online with the Employees’ State Insurance Corporation.

The new industrial classification will be aligned with the internationally accepted International Standard Industrial Classification (ISIC) of All Economic Activities created by the United Nations. According to the NIC-2008 report, the structure of NIC-2008 is identical to the structure of ISIC Rev. 4 up to 4-digit level ‘class,’ with only 5-digit ‘sub classes’ created specific to domestic requirements.

India’s department of industrial policy and promotion (DIPP) had announced the switch earlier in June, after the issue was taken up by the finance ministry. This revamp has been a long time in the making, with the draft of NIC-2008 first approved back in 2008 by the government’s Central Statistical Organization (CSO).

The 1987 system lacks specific guidelines in the classification of products, and only outlines broad sectors, causing confusion for products that may fall into one or more of the sectors. The 2008 system is expected to rectify this problem.

“A drill-down FDI policy to each line item of the NIC code will bring about clarity on policy implications, especially in sectors with caps and conditions,” said Akash Gupt, executive director of PricewaterhouseCoopers.

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