FDI route opens in big sectors

After seemingly meandering off target for a while, the Modi government has in a bid to expedite investment in the Indian market, reverted to its development focussed agenda by facilitating simpler foreign direct investment norms for 15 major areas, including focal sectors such as defence, mining, civil aviation, broadcasting and agriculture. In a notification last week, the Centre announced increase in passage of FDI through the automatic route. Even though data from the Department of Investment Policy and Promotion (DIPP) reveals that FDI inflows have been brisk in the last one year, it has been felt that providing for more, and easier, channels of investment might serve to further the value of FDI to the economy. To this end, the government has increased the powers of the Foreign Investment Promotion Board (FIPB) – the body through which all investment from abroad is processed – to give single window clearance for projects of up to Rs 50 billion from previous limit of Rs 30 billion. In doing so, it hopes to enhance India’s profile as a viable economic destination. Here is a primer on some of the more important developments in this regard: Defence: FDI enabled up to 49 % under automatic route and beyond that through the FIPB’s approval. The government has done away with requirement of mandatory permission from the Cabinet Committee on Security for such projects. Portfolio investment and investment by FVCIs will also be allowed up to permitted automatic route level of 49 %. This is aimed at boosting the domestic industry since the country currently imports up to 70 per cent of its military hardware. Mining: The immediate future course in the mining sector would include a government initiative to bring in an amendment to the Mines, Minerals Development and Regulation Act (MMDRA), promulgated in January. According to the government official, the prime focus of such an amendment would be to ensure improved ease of doing business by relaxing the laws governing the…

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