While trade barriers have fallen over time, barriers to foreign investment remain significant in countries like India and China. That’s why I was happy to read this story:

NEW DELHI – The Indian government looks all set to open up the retail sector beginning with food and a proposal in this regard is expected to go before the Cabinet by next month. The proposal is to allow up to 26 per cent FDI for first two years and subsequently increase it after seeing the results to 49 per cent and then to 74 after three years, official sources said. Commerce Minister Kamal Nath had said on Monday that Government was readying a discussion paper on the issue.

In recent weeks, I’ve been more optimistic about India’s development prospects than those of China. India seems to be opening faster; for example, foreigners may hold a 74% stake in Indian banks, while China currently limits foreign investors to 20%. Moreover, a recent article in Foreign Affairs points to a problem that is most obvious in China:

Conventional wisdom has long assumed that economic liberalization undermines repressive regimes. Recent events, however, suggest that savvy autocrats have learned how to cut the cord between growth and freedom, enjoying the benefits of the former without the risks of the latter.

Another sign of improvement in regards to FDI in India:

At least one Indian communist leader has found the courage to shed his party’s anachronistic mistrust of global capitalism. Buddhadev Bhattacharya, the Marxist chief minister of West Bengal Province, badly wants the Indonesian tycoon Anthony Salim’s $10 billion industrial township project to come to his region. [IHT]

Here’s more on Asian FDI trends.