To boost foreign investment, the central government has increased limits and relaxed rules for Foreign Direct Investment(FDI) in key sectors including defence, telecom, insurance, commodity exchanges and power exchanges. In telecom, the FDI limit has been increased from 74 per cent to 100 per cent under the Foreign Investment Promotion Board (FIPB) route.
These major policy decisions — taken late on Tuesday at a meeting convened by Prime Minister Manmohan Singh — are aimed at boosting the flow of foreign funds in the light of a depreciating rupee against the dollar and a bid to turn around declining investor sentiment. The 26 per cent FDI cap on defence manufacturing would now be under the automatic route and beyond 26 per cent the Cabinet Committee on Security (CCS) will take a decision on a case-to-case basis. “The CCS will take decisions in the defence sector on a case-to-case basis, which entails induction of latest technology into the country. We will approach the Cabinet soon on decisions taken in today’s [Tuesday’s] meeting. Clarity on multi brand retail guidelines will also be issued soon to address the concerns of investors,’’ Commerce and Industry Minister Anand Sharma told reporters here.
Addressing concerns, especially of the foreign investors in the insurance sector, the government hiked the 26 per cent FDI limit to 49 per cent under the automatic approval route.
Similarly, for basic and cellular services in the telecom sector, the government hiked the limit under the automatic route to 49 per cent and 49 to 100 per cent under the FIPB route. In petroleum and natural gas refining, commodity exchanges, power exchanges, stock exchanges and depositories, the cap has gone up to 49 per cent under the automatic route.
Similarly, for Asset Reconstruction Companies, the 49 per cent cap has been brought under the automatic route and from 49 per cent to 100 per cent under the FIPB route. For credit information companies, the cap under automatic route has been hiked to 74 per cent.
In the case of single-brand retail trading, the 49 per cent limit has been brought under the automatic route and from 49 per cent to 100 per cent under the FIPB route. For courier services, the cap has been hiked to 100 per cent under the automatic route.
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