India opens up for FDI flood
The government, in fire-fighting mode to arrest the slide of the Indian rupee, on Tuesday decided to increase the FDI cap in telecom, insurance, credit information and asset reconstruction companies.
The government also made it easier for foreign investors to invest in single-brand retail, petroleum refineries, commodity exchanges, power exchanges, tea and courier services by changing the investment route to automatic.
Under the automatic route, no permission is required to be taken from the Foreign Investment Promotion Board, thereby cutting delays in investment.
The second wave of reforms comes within 10 months of the government opening the flood gates of foreign investment in multi-brand retail.
In the sensitive sector of defence production, a proposal involving FDI beyond the current 26 per cent cap will have to go through the Cabinet Committee on Security (CCS), which will allow it only if the investment results in access to state-of-the-art technology. The definition of state-of-the-art technology would be determined by the defence ministry.
No decision was taken to increase FDI in civil aviation and media.
Tuesday’s decisions were taken at a meeting of senior Cabinet ministers chaired by Prime Minister Manmohan Singh. The government will now move a Cabinet note to implement these decisions. “We will also be coming (up) with clarity to give more comfort and space to investors in multi-brand retail, that is under process and that shall also happen very soon,” said commerce and industry minister Anand Sharma.
The government decided to allow 100 per cent FDI in telecom from the current 74 per cent. In the telecom sector, up to 49 per cent investment will be allowed via the automatic route and anything beyond 49 per cent will require FIPB permission.
The move will allow foreign companies, such as the Vodafone Group, Telenor and Sistema, to operate in the country without requiring an Indian partner. In the insurance sector, the FDI cap has been increased from 26 per cent to 49 per cent. A bill to raise the FDI cap in the sector is pending in the Rajya Sabha.
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