Govt clears FDI hike in 13 sectors, allows 100% in telecom

The government of India today decided to allow more foreign investment into 13 sectors of the economy including critical ones such as including telecom and defence.

In case of the Indian telecom sector the foreign investment cap has been raised to 100 percent, while investment in the defence sector will require FIPB (Foreign Investment Promotion Board) clearance for up to 26 percent and for 49 and higher percent, cabinet nod is required.

“The foreign investment cap in defence production has been increased from 26 percent to 49 percent. For 26 percent, the Foreign Investment Promotion Board (FIPB) will scrutinise the proposal before approval while the Cabinet Committee on Security will come into the picture for the 49 percent investment if the proposal necessitates use of state-of-the-art technology in defence production,” Commerce Minister Anand Sharma told reporters at a press conference in New Delhi.

The big economic decisions were taken after the Department of Industrial Policy and Promotion (DIPP) secretary, Saurabh Chandra made a presentation to Prime Minister Manmohan Singh today in the presence of Finance Minister P Chidambaram, Minister of State (Independent Charge) for Power Jyotiraditya Scindia, Food and Consumer Affairs Minister KV Thomas and Commerce Minister Anand Sharma besides secretaries of the concerned ministries.

“We reviewed the economic position of the country and as we had told earlier we will take decisions in this regard soon. All proposals taken in the meeting today were listed on the agenda and wide consultations took place among all stakeholders in the concerned ministries. I also had a detailed discussion with the finance minister (P Chidambaram) before going to this meeting,” Sharma said.

“All decisions on caps and routes were unanimously taken involving all stakeholders,” he said. Making it clear that India still remains an attractive investment destination, the minister said, “We are a country which is even in the worst of times always remains a favourite investment destination. In fact, our performance on FDI is better than last year.”

The commerce minister said that caps on some sectors remained the same while the route of investing the money stands changed.

In the petroleum and natural gas sector, the Centre decided to change the method of investment from the FIPB route to the automatic one while retaining the sectoral cap at 49 percent. The power exchanges also will come under the automatic route and the 49 percent cap has remain unchanged.

“Earlier, it was 26 percent through FDI while 23 percent came through Foreign Institutional Investors,” Sharma said. The stock exchanges cap also remain at 49 percent cap while the route has been changed from FIPB to automatic. Investments in the commodity exchanges now will be automatic not warranting a FIPB clearance like before. The cap is maintained at 49 percent.

The cap in the insurance sector now stands hiked to 49 percent from 26 percent via the automatic route.

“The cap in the asset reconstruction companies has been increased from 74 percent to 100 percent. While investment up to 49 percent will be through the automatic track and anything beyond 49 percent to 100 percent will need FIPB approval,” the commerce minister said.

In the tea sector, 100 percent FDI is allowed with investment up to 49 percent will be through the automatic route while investment beyond 49 percent will need FIPB approval.

The Centre also decided to increase both the cap and change the method of investment in the credit information companies as well.

“Earlier investment in the credit information companies was allowed up to 49 percent via the FIPB route. Now it stands at 74 percent and changed to automatic,” Sharma said.

While allowing 49 percent investment in the single brand retail sector through the automatic route, the government now allows investment beyond 49 percent to 100 percent in the sector subjected to FIPB approval.

“More clarity on investments in the single-brand retail and multi-brand retail sectors will follow soon,” the minister said.

The cap on foreign investment in the basic cellular services has been raised to 74 percent. Investment up to 49 percent will be automatic while from 49-74 percent, the FIPB nod is needed.

“A cabinet note on FDI control and ownership will be moved soon. However, all decisions stand taken,” Sharma said.