India sets up investment panel as FDI slumps 78%

India's government on Friday set up a panel to suggest ways to improve the climate for doing business in the country as figures showed foreign direct investment in India slid by 78 percent in June. The committee, headed by former Securities and Exchange Board of India chairman M. Damodaran, will prepare a report within six months for submission to the Congress-led government, the corporate affairs ministry said. Overseas investors have increasingly been giving a wide berth to Asia's third-largest economy -- until recently a sought-after investment destination. They have been deterred by a string of graft scandals, red tape, high inflation, sharply slowing growth and the government's inability to further open up the economy in the face of fierce political opposition. The panel will include Indian industrial tycoons Anand Mahindra and Kumar Mangalam Birla "and come out with a detailed roadmap for improving the climate of business in India in a time-bound manner", the ministry said. The late evening announcement coincided with the release of official data earlier in the day showing foreign direct investment (FDI) in June tumbled to $1.24 billion from $5.66 billion in the same month a year earlier. For the financial first quarter to June, FDI tumbled year-on-year by 67 percent to $4.43 billion, according to the department, with big drops in construction, real estate, mining, and business and financial services. The central bank said on Thursday that India could help reverse the investment decline by shortening investment approval times and sorting out land acquisition issues. Central bank governor Duvvuri Subbarao cited the example of Singapore, an investment hub, to stress the importance of doing away with cumbersome rules that deter business. "There is a need to make doing business easy by adopting models like the one in Singapore where multiple agencies/ministries sit together to quickly give a decision clearing investment projects," he said in the bank's annual report. Experts say foreign investment is vital for India, which needs to fund a $1 trillion scheme over the next five years to overhaul its dilapidated ports, airports, highways and other infrastructure seen as key to boosting growth. Among a host of stalled high-profile projects are South Korean steelmaker POSCO's plans to build a $12 billion mill. The plan has hung in limbo since 2005, running into trouble over land rights and environmental clearances. Prime Minister Manmohan Singh's government set out an ambitious plan to revive stalled economic reforms in the current parliamentary session and spur growth, which is at a near decade low. But its legislative agenda has been jeopardised by a new deadlock in parliament over allegations the government lost out on billions of dollars in revenues from a controversial allocation of coalfields.