Asia-Pacific TESCM Alert - 30 July 2013
India amends foreign direct investment policy
On 16 July 2013 via press release, the Indian Government released proposed amendments to the country’s Foreign Direct Investment (FDI) policy. These proposed amendments must be approved by the Cabinet and published through the press notes issued by the Ministry of Commerce and Industry to form a part of the FDI policy.
The decisions were taken in a meeting chaired by the Prime Minster, on the basis of the recommendations of the Mayaram Committee. The sectors for which the revised policy is proposed include petroleum and natural gas refining, commodity exchanges, power exchanges, stock exchanges, credit information companies, single brand retail trading, courier services, asset reconstruction companies, defence and telecommunications.
To meet the challenging economic scenario of a depreciating rupee and declining foreign investment, the Government has announced reforms in the FDI policy by listing out proposed relaxation in various sectors including telecommunications, defence, single brand retail trading and credit information companies.
The proposed changes are in line with the recommendations made by the Marayam Committee, Secretary, Department of Economic Affairs, Ministry of Finance. With these policy reforms, the Indian Government intends to increase flow of foreign investment and strengthen the confidence of foreign investors in India.
Under the present FDI policy, a majority of the sectors are under the automatic approval route and with these amendments, the list of sectors where approval is required has been further reduced. The Government has made an effort to remove the investment blockage by converting the Government approval route to an automatic route in non-sensitive sectors and in the sensitive sectors the limits have been enhanced through the approval route.
The above revisions are a positive step and they should be effective in increasing the foreign inflow and growth of India. The amendments shall be effective from date of issuance of formal Press Notes by the Department of Industrial Policy and Promotion (DIPP). These policy changes were essential to augment confidence of the foreign investor. The recommendation of the Mayaram Committee on various other issues including broadcasting, print media, pharmaceuticals, etc. are still under consideration and revisions pertaining to the investment mechanism in these sectors may be revised in the near future.