FDI Policy Reforms in India

Cardinal principle of the FDI policy of the country has been 

• Keep maximum sectors under automatic rule and regulate which are strategic in nature or have security concerns --> So >90% FDI comes via automatic route.
• Automatic route is
• Friendly to foreign investors
• Addresses the concerns of domestic constituency by increased manufacturing, job creation and overall economic growth. 
• Uniformity and simplicity are brought in across the sectors in FDI policy for attracting foreign investments.

To understand basic terminologies: CLICK HERE

Reforms undertaken:

• Government first reviewed the FDI policy in 
• Railways 
• Entire range of rail infrastructure was opened to 100% FDI under automatic route
• Defence
• Sectoral cap was raised to 49 percent. 
• For Infrastructure boost
• FDI policy in construction development sector was reviewed by government along with creating easy exit norms, rationalising area restrictions and providing due emphasis to affordable housing. 
• For medical devices sector, 
• Now 100 percent FDI under automatic route is permitted. 
• FDI in  services sector  - Bold Reforms. 
• Insurance
• FDI limit to 49% --> benefits:
• Govt wanted to expand insurance cover to its large population 
• Capital to insurance companies
• Pension sector 
• Also been opened to FDI up to the same limit. 
• Further, FDI policy has now been amended to provide that NRI investment on non-repatriation basis will be treated on par with domestic investments.
• Done away with the distinction between different types of foreign investments, especially between foreign portfolio investments and foreign direct investments, and replaced them with composite caps.

[Ref: PIB]