No change in I&B, aviation, multi-brand retail
To boost the sagging economy, the Government today hiked foreign direct investment (FDI) limits in a host of sectors and allowed 100 per cent in telecom and asset reconstruction companies.
Coming within 10 months of the government allowing foreign investments in multi-brand retail and civil aviation, Round 2 of reforms retained the Defence sector cap at 26 per cent. The level can be raised for proposals involving advanced technology. But this will have to be approved by the Cabinet Committee on Security, said Commerce and Industry Minister Anand Sharma at a press meet.
The Finance and Industry Ministries’ efforts to raise caps in information and broadcasting, civil aviation, multi-brand retail and petroleum and natural gas remained unsuccessful.
Prime Minister Manmohan Singh, at a meeting with Cabinet colleagues on Tuesday, also decided to allow foreign investments through the automatic route in petroleum and natural gas, commodity bourses, and power exchanges, while retaining the 49 per cent cap.
In basic cellular services, the Government has raised the FDI cap from 74 per cent to 100 per cent. Russian major Sistema JSFC controlled Sistema Shyam Teleservices said the policy decision is a positive development for the industry. “With fresh foreign direct investments coming in, this would further catalyse growth and also the proliferation of telecom services across the country,” Sistema Shyam said.
While 49 per cent investment can be made through the automatic route, Foreign Investment Promotion Board approval is needed for higher stakes. New players, such as AT&T, may also find the sector attractive now.
The move will also allow some of the players to structure their holdings more transparently without bringing in Indian joint venture partners. Players such as Vodafone will have the opportunity to take full control of their Indian operations. In single-brand retail sector, where 100 per cent FDI is already allowed, 49 per cent investment will be permitted through the automatic route while investments over that level have to be via the FIPB.
“Our decision to liberalise FDI rules further is for attracting more investments in the country and give a boost to manufacturing activities,” Sharma said.
The widening current account deficit and the falling rupee have prompted the Government to look at ways to attract more foreign investments. The FDI decisions will be incorporated in a Cabinet note and placed before the Union Cabinet for approval at a meeting soon, Sharma added.
However, not all are enthused by the decisions. The petroleum refinery industry said that unless this is supported by strong policy changes, including stability in petroleum retailing, few foreigners would like to come in. Some say getting foreign investors was never a problem, the issue was domestic policies. Those in the power exchange business say the market is not mature for foreign investments.