The government lifted the investment limit that can be approved automatically by the Foreign Investment Promotion Board (FIPB) from current Rs 3,000 crore to Rs 5,000 crore.
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The Indian broadcast sector celebrated this Diwali with increased FDI limits as a bonus from the government. But if BJP continues to keep itself busy with cosmetic changes without addressing the actual reforms needed to usher in growth, investment and finally job creation, soon the global investors and world leaders that PM Modi is so keen to meet, will become disinterested.
India has become one of the most important investment destinations. “They will ease, rationalise and simplify processes”.
In defence, while FDI limits has been kept at 49 per cent, foreign institutional investors and foreign venture capital investors will be allowed to take up the entire chunk.
The department of industrial policy and promotion (DIPP) announced a review of foreign direct investment (FDI) policy in as many as 15 sectors. This means that any project regardless of size which is under construction can have access to FDI. For instance, in the defence sector, the proposals for FDI up to 49% will now come under the automatic route instead of the government route as under extant rules.
To encourage investments in limited liability partnerships (LLPs), 100% FDI has been allowed under the automatic route in LLPs in sectors where 100% overseas investment is allowed. “The policy changes, especially the clarification on leasing/renting of completed assets not constituting real estate activity is going to be a game changer and will fuel the growing appetite in the Indian and worldwide investment community for investments in completed commercial buildings”, said Kalpesh Maroo, Partner, BMR & Associates LLP.
During the Prime Minister’s visit to Washington DC in September 2014, USIBC had identified upwards of $41 billion slated for investment from members over the next three years, based on a survey of 20 percent of USIBC’s membership.
The lock-in conditions will not apply to hotel and resort development, hospitals, special economic zones, educational institutions, old-age homes and on investment by non-resident Indians.
The foreign portfolio investors can also invest up to 74 per cent in private banking. These LLPs with foreign investment will also be allowed to make downstream investments, officials said. Now full foreign ownership is allowed only for tea plantations in the country. This will provision will cover DTH, mobile TV and cable networks. It may help firms like Apple to set up its own stores in India.
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For companies retailing high-technology items, the sourcing conditions will be eased further after government approval if they are not able to meet their requirements locally. Further, no approval of the government is required for investment in automatic route sectors by way of swap of shares.
