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Foreign investment rules relaxed for various sectors

16 July, 2013

The government relaxed foreign direct investment (FDI) rules on Tuesday in a broad swathe of industries including telecoms, single brand retail and oil and gas in a bid to lure capital inflows, prop up a sliding currency and rev up growth.

In a meeting of senior cabinet ministers, Prime Minister Manmohan Singh cleared plans to allow 100 per cent FDI in telecoms, Commerce and Industry Minister Anand Sharma told reporters.

The move will allow companies such as Vodafone Group Plc, Telenor ASA and Sistema to operate in the country without requiring an Indian partner. Foreign investors are currently allowed to hold a maximum 74 per cent in local phone carriers.

Sharma added that the government will have to approve any FDI proposal beyond 26 per cent in the defence production sector, on condition it involves state-of-the-art technology.

India’s weakest economic growth in a decade and a record high deficit in the current account, the broadest measure of a country’s international trade, have made the rupee the worst-performing emerging Asian currency so far this year.

It hit an all-time low of 61.21 per dollar last week and is down nearly 10 per cent against the dollar since May.

To stabilise the currency, the central bank on Monday night raised short-term borrowing costs, restricted funds available to banks and said it would sell 120 billion rupees in bonds, effectively draining cash from the market.

TEAM VCC adds:

FDI Highlights

A meeting chaired by Prime Minister Manmohan Singh took the following decisions on FDI limits.

  •  FDI cap in telecom raised to 100 per cent from 74 per cent
  • No change in 49 per cent FDI limit in civil aviation
  • FDI cap in defence production to stay at 26 per cent; higher investment may be considered in state-of-the-art technology production by CCS
  • 100 pc FDI allowed in single brand retail—49 per cent through automatic, 49-100 per cent through FIPB
  • FDI limit in insurance sector raised to 49 per cent from 26 per cent
  • FDI up to 49 per cent in petroleum refining allowed under automatic route compared with earlier approval route
  • In power exchanges, 49 per cent FDI allowed through automatic route compared with earlier FIPB route
  • Raised FDI in asset reconstruction companies to 100 per cent from 74 per cent; of this, up to 49 per cent will be under automatic route
  • FDI limit increased in credit information companies to 74 per cent from 49 per cent
  • FDI up to 49 per cent in stock exchanges, depositories allowed under automatic route
  • FDI up to 100 per cent through automatic route allowed in courier services
  • FDI in tea plantation up to 49 per cent through automatic route; 49-100 per cent through FIPB route
  • No decision taken on FDI cap in airports, media, brownfield pharma and multi-brand retail

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Foreign investment rules relaxed for various sectors

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