In yet another bid to push aside the pall of economic gloom over the country, the UPA government Tuesday relaxed foreign direct investment limits across sectors, including allowing 100 per cent foreign investment in the telecom sector.
It also opened up the possibility of investments in defence production beyond the existing 26 per cent on a case-by-case basis but did not take any decision on raising the foreign investment limit in aviation.
The decisions were taken at a meeting chaired by Prime Minister Manmohan Singh and attended by Finance Minister P Chidambaram, Commerce and Industry Minister Anand Sharma, Home Minister Sushil Kumar Shinde, Food and Consumer Affairs Minister K V Thomas and Petroleum Minister Veerappa Moily.
Last September, the government had allowed 51 per cent FDI in multi-brand retail to woo global retailers.
The latest decisions follow the country witnessing its weakest economic growth in a decade and a huge current account deficit last fiscal, hurting the rupee and making it the worst-performing currency in Asia.
Tuesday’s decision allows foreign telecom companies such as Vodafone and Telenor to operate without an Indian partner. Until now, foreign investors were allowed to hold up to 74 per cent in basic and cellular services.
“In the defence sector, currently, 26 per cent FDI is allowed on approval route. That will remain. For proposals of FDI beyond 26 per cent involving state-of-the-art technology, they will be approved by the Cabinet Committee on Security,” the commerce minister told reporters after the meeting. The term “state-of-the-art technology” would be defined by the defence ministry. This means foreign firms can invest beyond 26 per cent if it would give India access to modern and highly developed technology. The defence ministry had in the past opposed moves to enhance the FDI cap citing security issues.
However, no decision was taken on the aviation sector and clarifications about FDI in multi-brand retail would be issued soon, Sharma said. “Decision on FDI in brown-field pharma and the clarifications regarding ownership would be discussed later,” he said. A cabinet note regarding Tuesday’s decisions would be moved within two or three days, a senior official said.