The Cabinet Thursday raised the cap on foreign direct investment (FDI) in the telecom and defence sectors and relaxed investment conditions for multi-brand retail companies.
The move came a day after Finance Minister P Chidambaram said that the government was working on several decisions, including a significant liberalisation of FDI limits, to take on the challenge posed by the current account deficit.
Related: Tough norms to be axed to woo elusive retail FDI engine
Thursday?s decisions formalise the announcements made on July 16 after Prime Minister Manmohan Singh?s meeting with senior Cabinet ministers. The decisions include allowing 100 per cent FDI in the telecom sector and FDI beyond the existing 26 per cent in the defence sector on a case-by-case basis.
In multi-brand retail, the Cabinet has allowed companies to set up outlets in cities even if their population is below 10 lakh as per the 2011 census. This move was first reported by The Indian Express on July 25.
Related: ‘FDI in multi-brand retail would result in huge unemployment’
Under the earlier proposal, foreign retailers could open outlets only in cities with a population of 10 lakh and more.
Besides, sourcing and mandatory back-end infrastructure rules have also been relaxed. Foreign investors will now be able to continue sourcing from the same small and medium enterprises even when the supplier?s turnover exceeds $1 million. The limit has been doubled to $2 million.
The government has also relaxed the back-end investment rule. Foreign investors now need to invest only $50 million from the first tranche of their investment in setting up back-end infrastructure and not during subsequent investments.
The clearance to raise the FDI cap in insurance indicates the government has made up its mind to bring the insurance bill to raise the limit to 49 per cent in Parliament?s monsoon session beginning Monday.