NEW GOVT MEANS BUSINESS Modi Sarkar hits the ground running with finmin conjuring up a variety of measures to juice up the inert economy and light a fire in the market's belly Proposes at least 49% foreign investment in all sectors, barring a few strategic ones
The finance ministry is scripting a liberal foreign investment policy framework that will allow at least 49% investment in all sectors, barring a few strategic ones, as part of plans to stimulate overseas interest and help lift the economy out of a prolonged slump.
Moreover, the ministry will propose that the minimum 49% investment is allowed through the automatic route, without requiring time-consuming government approval, based on the argument that Indian-owned and controlled companies should not face undue scrutiny.
“If ownership and control rests in Indian hands, sectoral caps can be set at 49% as a default barring a few sectors,“ said a finance ministry official, justifying the liberal threshold in the policy paper the ministry has prepared for the incoming Modi government, which sees kickstarting growth as a priority. The official did not elaborate on the sectors but it is expected that defence, railways, e-commerce and media will be significant beneficiaries in this round of liberalisation. The proposal could also offer a way to settle the issue over FDI in multi-brand retail. The BJP, in its manifesto, opposed allowing entry to foreign retailers.
Scaling back FDI in the sector to 49% could be a compromise solution. But the final call will be a political one.
Arun Jaitley , who's the minister for finance and defence, has already indicated that he will look into the issue of FDI in defence. The ministry will also propose a simplification of policy that will end the differentiation among various forms of overseas investment through a composite cap structure. The sectoral 49% cap will cover FDI, foreign portfolio investment as also non-resident Indian investment (FDI+FPI+NRI).
Any investment over 49%, except when 100% has been permitted through the automatic route, will have to be approved by the Foreign Investment Promotion Board (FIPB), which will end all confusion over what requires clearance.
A composite cap formulation could be acceptable for the insurance and pension sectors as well, where the change would have to be carried out through legislation. The policy paper will focus on industrial sectors as captured in the National Industrial Code to give better clarity to foreign investors. It would spell out clearly the regime applicable for each industrial sector. “The idea is to devise a framework that would make it easier for the country to attract foreign capital,“ the official said. A company that is owned and controlled by an Indian should be treated differently than a company owned or controlled by foreigners.
A stringent definition of `control' that's already in place will ensure that managements don't enter into agreements with foreign investors that will mean surrendering control. The last round of liberalisation carried out by the UPA in September 2012 was based on recommendations made in a report by the economic affairs secretary .
The finance ministry is scripting a liberal foreign investment policy framework that will allow at least 49% investment in all sectors, barring a few strategic ones, as part of plans to stimulate overseas interest and help lift the economy out of a prolonged slump.
Moreover, the ministry will propose that the minimum 49% investment is allowed through the automatic route, without requiring time-consuming government approval, based on the argument that Indian-owned and controlled companies should not face undue scrutiny.
“If ownership and control rests in Indian hands, sectoral caps can be set at 49% as a default barring a few sectors,“ said a finance ministry official, justifying the liberal threshold in the policy paper the ministry has prepared for the incoming Modi government, which sees kickstarting growth as a priority. The official did not elaborate on the sectors but it is expected that defence, railways, e-commerce and media will be significant beneficiaries in this round of liberalisation. The proposal could also offer a way to settle the issue over FDI in multi-brand retail. The BJP, in its manifesto, opposed allowing entry to foreign retailers.
Scaling back FDI in the sector to 49% could be a compromise solution. But the final call will be a political one.
Arun Jaitley , who's the minister for finance and defence, has already indicated that he will look into the issue of FDI in defence. The ministry will also propose a simplification of policy that will end the differentiation among various forms of overseas investment through a composite cap structure. The sectoral 49% cap will cover FDI, foreign portfolio investment as also non-resident Indian investment (FDI+FPI+NRI).
Any investment over 49%, except when 100% has been permitted through the automatic route, will have to be approved by the Foreign Investment Promotion Board (FIPB), which will end all confusion over what requires clearance.
A composite cap formulation could be acceptable for the insurance and pension sectors as well, where the change would have to be carried out through legislation. The policy paper will focus on industrial sectors as captured in the National Industrial Code to give better clarity to foreign investors. It would spell out clearly the regime applicable for each industrial sector. “The idea is to devise a framework that would make it easier for the country to attract foreign capital,“ the official said. A company that is owned and controlled by an Indian should be treated differently than a company owned or controlled by foreigners.
A stringent definition of `control' that's already in place will ensure that managements don't enter into agreements with foreign investors that will mean surrendering control. The last round of liberalisation carried out by the UPA in September 2012 was based on recommendations made in a report by the economic affairs secretary .
