related to vertical and horizontal equity even as taking the process of fiscal consolidation further. state finance commission the constitution ( 73rd and 74th ) amendment acts, 1993 have respectively, accorded constitutional status to rural and urban local bodies as the third tier of government. the amendments provide for constitution of state finance commissions every five years. following the recommendations of the state finance commissions ( sfcs ) and taking into account the devolutions made by the central finance commission ( cfc ), the state governments are required to devolve resources to their local bodies. not all states have constituted sfcs. and a fewer states have submitted action taken reports ( atrs ) on the recommendations made by the sfcs as noted by the twelfth ( central ) finance commission ( twfc ). the twfc, inter alia, recommended that sfcs should follow a normative approach in the assessment of revenues and expenditure in order to arrive at the gap that may be considered by the cfc and that the principal recommendations of the sfcs may be accepted without modification as in the case of cfc. v. role of the reserve bank of india in sub - national finances the rbi has, over the years, closely interacted with the state governments in its developmental role – particularly in areas of development of agriculture, and small industries. the rbi was specifically entrusted with an important promotional role, since its inception, of financing agricultural operations and marketing of crops. in fact, the agricultural credit department was created simultaneously with the establishment of the rbi in 1935. study of state finances the reserve bank prepares and publishes an annual study on the state government finances. this is a unique study since it compiles, consolidates and analyses detailed data on the budgets of all the state governments. it also documents the policy initiatives on state finances and debt management by the state governments, the government of india and the reserve bank. the study has been well received by policy makers and academicians, both in india and abroad, and is an important reference document. model fiscal responsibility legislation the rbi played a facilitating role in the states ’ endeavour for rule - based fiscal reforms by providing the secretariat support to a group of state finance secretaries for preparing a model fiscal responsibility legislation for the states. the final report was submitted to the reserve bank in january 2005. the group recommended that the model legislation would generally follow the pattern of the central frbm act, and build upon the state fiscal responsibility legislations already enacted. the group also took into account

also be seen as a corporate strategy to promote the brand image and utilisation of raw materials available in the host country. in the indian context, overseas investments have been primarily driven by either resource seeking or market seeking or technology seeking motives. of late, there has been a surge in resource seeking overseas investments by indian companies, especially to acquire energy resources in australia, indonesia and africa. it is against this background that i intend to speak on recent trends and emerging issues in relation to indian outward fdi. i am thankful to bombay chamber of commerce for choosing this topical subject for today ’ s discussion. in my presentation, i would briefly talk about the evolution of outward fdi policy in india, trends and analysis of outward fdi, funding pattern of outward fdi, measures taken by the reserve bank of india and government of india, emerging issues and end with some thoughts on way forward. bis central bankers ’ speeches b. evolution of outward foreign investment policy in india change in policy environment across the economies has greatly influenced the outward investment pattern in the global economy. nonetheless, recognising the concerns of capital outflows, governments in different countries, particularly emerging and developing economies, have been relatively more circumspect on undertaking policy liberalisation of outward investment. therefore, it is important to highlight how the indian policy in this regard has evolved over time. in the indian context, overseas investments in joint ventures ( jv ) and wholly owned subsidiaries ( wos ) have been recognised as important channels for promoting global business by the indian entrepreneurs. the broad approach has been to facilitate outward foreign direct investment through joint ventures and wholly owned subsidiaries and provision of financial support to promote exports including project exports from india. with a steady rise in capital inflows, particularly in the second half of 2000s, the overall foreign exchange reserve position provided comfort to progressive relaxation of the capital controls and simplification of the procedures for outbound investments from india. three distinct overlapping phases as under can be discerned in the evolution of the indian outward fdi policies. phase i ( 1992 to 1995 ) : period of liberalization of indian economy guidelines on outward fdi were in place before the process of liberalisation and globalisation of indian economy in 1991 – 92. policy changes since 1992 were undertaken keeping in view the changing needs of a growing economy. understandably, the rules were quite restrictive and subject to conditions of no cash remittance and mandatory repatriation of dividend from the profits from the