Finance ministry proposes raising investment cap in most sectors

The finance ministry has prepared an approach paper to pave the way for a more liberal foreign direct investment (FDI) policy based on 'four buckets' that will see the limit for overseas investors being raised in most sectors and even completely do away with in some cases to allow 100-per cent foreign investment .

A senior finance ministry official told Mail Today that the paper has been submitted to the Department of Industry Policy and Promotion, which will now go ahead with drawing up the new policy to facilitate higher capital inflow. "The main approach is that FDI should be seen in four buckets which will include sectors in which FDI will be freely permitted up to 100%," the official added.

The cap for the telecom sector, which is currently at 74 per cent, is also proposed to be completely removed so that 100 per cent FDI is allowed after the approval of the Foreign Investment Promotion Board.

There will be a second category in which FDI will be allowed up to 49 per cent with Indian control. Public sector banks such as State Bank of India and Punjab National Bank are expected to come under this category.

A third category will include sectors such as multi-brand retail, insurance and pension funds where the FDI cap has been proposed at 74 per cent, which will give more freedom to foreign investors but yet retain some Indian supervision with a 26-per cent stake.
 

The approach paper also pro-poses automatic clearance in sectors where FDI is permitted up to 49 per cent in order to cut red tape and ease the way for doing business since control in any case is in Indian hands.

The bucket in which no FDI is allowed or completely prohib-ited is envisaged to be very small and will be confined to sensitive sectors such as space and nuclear energy.

According to sources, finance minister P. Chidambaram has already discussed the issue with commerce and industry minister Anand Sharma and reached a broad consensus.

Sharma had on Saturday said that he "strongly favoured" raising the FDI cap in telecom and defence sectors adding he will meet global investors to address their concerns particularly in multi-brand retail.

Sharma, who left on 10-day visit to Helsinki, St Petersburg, Belfast and London to woo for-eign investors, said that he would address concerns of investors in the retail sector and ensure all help in setting up supermarkets in the country. He added that his ministry would move the Cabinet for further liberalisation in other sectors which have potential for FDI inflow.

Courtesy: Mail Today