The group, headed by Department of Industrial Policy and Promotion (DIPP) Secretary Saurabh Chandra, will hold its first meeting tomorrow, an official told PTI.
"Last month, the Prime Minister's Office constituted the IMG to further simplify the language or structure in the text of the consolidated FDI policy. It would help investors more in understanding our policies," the official added.
Besides the DIPP, officials from the finance and other ministries would be part of the IMG.
The DIPP is scheduled to release the next edition of its consolidated FDI policy document on March 31, incorporating changes made over the past year. The sixth edition was issued in April 2013.
The DIPP, which is under the Ministry of Commerce and Industry, is the nodal agency on foreign direct investment policy. It compiles all policies related to India's FDI regime into a single document, which is updated every year.
Investors would otherwise have to go through various press notes issued by the industry department and the RBI regulations to understand the policy.
FDI is considered crucial for economic development and India has taken several steps to attract such funds.
Last year, the government relaxed FDI norms in a dozen sectors, including telecom, defence, PSU oil refineries, commodity bourses, power exchanges and stock exchanges.
FDI inflows during April-November of the current financial year declined 15 per cent to USD 12.6 billion from USD 14.7 billion in the same period a year earlier.
India is projected to require about USD 1 trillion between 2012-13 and 2016-17, the 12th Five-Year Plan period, to fund infrastructure such as ports, airports and highways.
A decline in FDI would hurt the rupee, which had depreciated to a record low of 68.85 against the US dollar on August 28 last year. The local currency has since recovered and closed at 62.20 per dollar yesterday.