In a landmark decision, the Centre had allowed 100 per cent FDI in a wide range of manufacturing activities and commerce, telecommunications, airports (including concessions for private sector participation in greenfield airports proposed in Union Budget, 2002-03), in special economic zones, courier services, drugs and pharmaceuticals, hotel and tourism sector.
And for private sector banks, FDI up to 49 per cent from all sources was permitted under the automatic route. The Reserve Bank of India (RBI) had allowed foreign institutional investments (FII) to trade in exchange traded derivative contracts subject to limits prescribed by the Securities and Exchange Board of India.
And, as announced in the Union Budget 2002-03, FIIs portfolio investment will not be subject to sectoral limits for FDI except in specified sectors.
Foreign investment flows rose to $5.9 billion in 2001-02. Inflows under FDI touched a high of $3.9 billion surpassing the previous peak of $3.6 billion in 1997-98.
Ongoing liberalisation of current external transactions encompassed repatriation of current income like rent, dividend, interest and pension of non-resident Indians, based on appropriate certification.
Existing limits for Indian direct investment outside India under the automatic route were raised to $100 million. The RBI had operationalised two-way fungibility of American depository receipts (ADR) or global depository receipts (GDR) became operational in February 2002.
The RBI had also allowed corporates on a case by case basis to credit even higher proportions of export proceeds to their EEFC accounts, in order to enabling them to take advantages of low interest rates and prepay their external commercial borrowings.