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