India gives away telecom, insurance and defence
17 July 2013 5:38 AM IST
India on Tuesday decided to hike the foreign direct investment limits in a host of areas, notably telecom, insurance and defence. The major executive decision was taken (without the sanction of Parliament) at a meeting especially convened by Prime Minister Manmohan Singh to discuss sectoral foreign investment caps and attended by most of the key economic ministers, commerce minster Anand Sharma told reporters.
In its edition dated 13 July 2013, Millennium Post broke the story that the US government has been putting huge pressure on India to relax certain crucial norms for FDI in retail to diffuse the crisis of the rupee, which is fast depreciating against the dollar, the world’s only accepted reserve currency. The Indian government, too, has given an affirmative reply to this American pressure.
Tuesday’s decisions include hiking foreign direct investment limit in the insurance sector to 49 per cent from the existing 26 per cent and in the telecom sector to 100 per cent from the earlier 74 per cent.
Despite opposition from defence minister AK Antony, the government has decided to further open up defence sector for overseas investments. ‘In defence production, 26 per cent through FIPB (Foreign Investment Promotion Board) route stays. For state-of-art technologies, FDI beyond this is to be approved through CCS (Cabinet Committee on Security),’ Sharma said.
‘Proposals beyond 26 per cent, where the project brings state-of-the-art technology, the decision rests with CCS. Only those proposals will be recommended (to the CCS) where state-of-the-art technology is involved,’ he added.
The minister said the overseas investments would help provide access to state-of-the-art technology to Indian firms involved in defence production.
This apart, several approvals, earlier requiring their routing through the Foreign Investment Promotion Board (FIPB) have been brought under the automatic route. ‘Basically, under the automatic route, you apply, comply and go ahead,’ an official in the commerce and industry ministry explained.
In single-brand retail trading FDI upto 49 per cent will now be allowed through the automatic route. ‘For 49 per cent to 100 per cent, the investment decision will be routed through FIPB,’ Sharma said. For the telecom industry, the decision to allow 100 per cent foreign equity will help a host of domestic promoters reeling under billions of dollars of debt.
The move will allow the companies like Vodafone Group, Telenor and Sistema to operate in India without a local partner. Experts said in defence, apart from facilitating flow of money, the move will fetch some state-of-the-art technology that was hitherto elusive.
The government’s move is expected to help curb the current account deficit and provide support to the battered rupee, which hit a record low of 61.21 against a dollar last week. The rupee has lost almost 10 per cent of its value in the past two months. In fact, the rupee has been the worst performer among the emerging markets currencies so far this year.
The high current account deficit has been putting pressure on the Indian currency. The current account deficit, the difference between the country’s imports of goods, services and transfers and exports, touched a record high 4.8 percent of the GDP in the financial year ended 31 March, 2013. Economic growth slumped to five percent in 2012-13, the lowest in a decade. Experts said the liberal policy would result in great flow of overseas investments in the country and help control the current account deficit and revive economic growth.
‘This should bring FDI into the country, which will help in managing our current account deficit and encourage fresh investments,’ said Naina Lal Kidwai, president, Federation of Indian Chambers of Commerce and Industry. The FDI inflows to India declined to $22.42 billion in 2012-13 from $36.50 billion in the previous year.
In its edition dated 13 July 2013, Millennium Post broke the story that the US government has been putting huge pressure on India to relax certain crucial norms for FDI in retail to diffuse the crisis of the rupee, which is fast depreciating against the dollar, the world’s only accepted reserve currency. The Indian government, too, has given an affirmative reply to this American pressure.
Tuesday’s decisions include hiking foreign direct investment limit in the insurance sector to 49 per cent from the existing 26 per cent and in the telecom sector to 100 per cent from the earlier 74 per cent.
Despite opposition from defence minister AK Antony, the government has decided to further open up defence sector for overseas investments. ‘In defence production, 26 per cent through FIPB (Foreign Investment Promotion Board) route stays. For state-of-art technologies, FDI beyond this is to be approved through CCS (Cabinet Committee on Security),’ Sharma said.
‘Proposals beyond 26 per cent, where the project brings state-of-the-art technology, the decision rests with CCS. Only those proposals will be recommended (to the CCS) where state-of-the-art technology is involved,’ he added.
The minister said the overseas investments would help provide access to state-of-the-art technology to Indian firms involved in defence production.
This apart, several approvals, earlier requiring their routing through the Foreign Investment Promotion Board (FIPB) have been brought under the automatic route. ‘Basically, under the automatic route, you apply, comply and go ahead,’ an official in the commerce and industry ministry explained.
In single-brand retail trading FDI upto 49 per cent will now be allowed through the automatic route. ‘For 49 per cent to 100 per cent, the investment decision will be routed through FIPB,’ Sharma said. For the telecom industry, the decision to allow 100 per cent foreign equity will help a host of domestic promoters reeling under billions of dollars of debt.
The move will allow the companies like Vodafone Group, Telenor and Sistema to operate in India without a local partner. Experts said in defence, apart from facilitating flow of money, the move will fetch some state-of-the-art technology that was hitherto elusive.
The government’s move is expected to help curb the current account deficit and provide support to the battered rupee, which hit a record low of 61.21 against a dollar last week. The rupee has lost almost 10 per cent of its value in the past two months. In fact, the rupee has been the worst performer among the emerging markets currencies so far this year.
The high current account deficit has been putting pressure on the Indian currency. The current account deficit, the difference between the country’s imports of goods, services and transfers and exports, touched a record high 4.8 percent of the GDP in the financial year ended 31 March, 2013. Economic growth slumped to five percent in 2012-13, the lowest in a decade. Experts said the liberal policy would result in great flow of overseas investments in the country and help control the current account deficit and revive economic growth.
‘This should bring FDI into the country, which will help in managing our current account deficit and encourage fresh investments,’ said Naina Lal Kidwai, president, Federation of Indian Chambers of Commerce and Industry. The FDI inflows to India declined to $22.42 billion in 2012-13 from $36.50 billion in the previous year.
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