Saturday, 18 July 2015

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]

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