DIPP proposes to bring FDI, FII under composite cap to streamline foreign investments
The proposals seeks to do away with the different kinds of overseas investment and bring about clarity in the norms.<br />
New Delhi: Seeking to streamline the foreign investment regime, the commerce and industry ministry has proposed to introduce a composite cap which will include FDI, FII and other instruments in various sectors.
In a draft cabinet note, which was circulated for inter-ministerial consultations, the Department of Industrial Policy and Promotion (DIPP) has said that under the present structure, a change in the FII/FPI investments can lead to change in control and ownership of a company.
The proposals seeks to do away with the different kinds of overseas investment and bring about clarity in the norms.
The move would help in removing ambiguity on application of sectoral caps, conditionalities and approval requirements in different sectors and bring simplification in the foreign investment policy.
It would also provide Indian firms and investors an option of category of investments between FDI, FPI (FII, Qualified Foreign Investors), NRI and Foreign Venture Capital Investor.
"The proposal if approved by the Union Cabinet would help in improving ease of doing business in India," sources said.
Further, it has proposed that over 24 percent FPI/FII in existing pharmaceutical companies would be subject to government approval and compliance of performance linked conditionalities.
As per the proposal, the DIPP has proposed a composite foreign investment cap (FDI + FPI (FII, QFI) + NRI + FVCI) in sectors including agriculture, tea, mining, broadcasting, media, airports, retail (single brand and multi-brand),e-commerce, asset reconstruction companies, banking, commodity exchanges and insurance.
FII inflows into the country's capital market so far this year stood at $23 billion. On the other hand, India has received $24.29 billion worth of FDI.
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Sitharaman said investments by FIIs and FPIs in debt securities would be allowed to be transferred and sold to domestic investors in a timely manner.
The minister's statement assumes significance as introduction of composite caps on foreign investment has led to confusion among bankers who say overseas portfolio investments can now go up to 74 percent as against the current ceiling of 49 percent.