FDI Norms To Be Eased In 15 Sectors Including Defence, Banking And E-Commerce

10/11/2015 5:31 PM IST | Updated 15/07/2016 8:25 AM IST
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MADHUBANI, INDIA - NOVEMBER 1: Prime Minister Narendra Modi during an election campaign rally for Bihar Assembly elections on November 1, 2015 in Madhubani, India. Bihar will hold five-phase elections between October 12 and November 5 to elect the 243-member assembly. Counting of votes will take place on November 8. BJP led NDA and Grand Secular Alliance comprising of RJD, JD (U) and Congress are two main coalitions vying to form the next government in the state. (Photo by Hindustan Times via Getty Images)

A day before Diwali and 48 hours after an election debacle in Bihar, the Narendra Modi government has said it would make foreign investment easier in 15 crucial sectors of the Indian economy. These include sensitive sectors such as defence, broadcasting and emerging international favourites such as single brand retail, private-sector banking and the manufacturing sector. There is no clarity yet as to how much restrictions would be eased to accommodate greater investment by foreign companies or individuals.

Reuters reports that the government also increased the financial power of the Foreign Investment Promotion Board to give single window clearance for investment projects up to 50 billion rupees ($753.35 million) from 30 billion rupees.

"The crux of these reforms is to further ease, rationalise and simplify the process of foreign investments into the country and to put more and more FDI proposals on automatic route instead of government route where time and energy of the investors are wasted," the government said in a statement.

It is not clear as to whether government plans to push through these reforms through legislation in Parliament, or use ordinances given the Opposition parties that are now increasingly learning to work together to stymie government proposals. The Winter session of Parliament is expected to begin later this month and there is considerable clamour among businessmen to ensure that it isn't washed out like the monsoon session. The latest Bihar polls have also put pressure on the government to reassure the nation that it is committed to economic development and transformation and not get side-tracked by communalism.

The Modi government is still in a minority in the Rajya Sabha, which has blocked most of the government's reforms including the Goods and Services Tax bill. "Opening up the manufacturing Sector for wholesale, retail and E-Commerce so that the Industries are motivated to Make In India, " the government press statement added, " and sell it to the customers here instead of importing from other countries."

The Narendra Modi government has increased FDI limit in the insurance sector to 49 % and allowed foreign participation in the defence sector to up to 49 %. It has also allowed up to 100 per cent FDI in railway projects.

India was rated ahead of China and the US as the world's number one destination for foreign direct investment, according to The Financial Times newspaper.

India received $31 billion in foreign capital inflows in the first half of 2015; China was second with $28 billion and US third with $27 billion, the report said.

These are the sectors in which government is planning to change rules to encourage foreign direct investment.

i. Limited Liability Partnerships, downstream investment and approval conditions.

ii. Investment by companies owned and controlled by Non-Resident Indians (NRIs)

iii. Establishment and transfer of ownership and control of Indian companies

iv. Agriculture and Animal Husbandry

v. Plantation

vi. Mining and mineral separation of titanium bearing minerals and ores, its value addition and integrated activities

vii. Defence

viii. Broadcasting Sector

ix. Civil Aviation

x. Increase of sectoral cap

xi. Construction development sector

xii. Cash and Carry Wholesale Trading / Wholesale Trading (including sourcing from MSEs)

xiii. Single Brand Retail Trading and Duty free shops

xiv. Banking-Private Sector; and

xv. Manufacturing Sector

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