To boost foreign exchange remittance and capital inflows across sectors, the government on Thursday approved a proposal allowing investment by non-resident Indians (NRI) to be deemed as domestic investment on a par with investment made by residents. This means NRI investment will not be included in the category of foreign investment.

Since NRI investment made under Schedule 4 of FEMA (Transfer or Issue of Security by Persons Resident Outside India) regulations is on non-repatriable basis, it needs to be clearly provided that such investments, for the purposes of FDI policy, are domestic investments, an official statement said. “This will enable investments by NRIs, Overseas Citizen of India (OCI) and Persons of Indian Origin (PIO) cardholders under Schedule 4 on non-repatriation basis, across sectors, without being subjected to the conditions associated with foreign investment,” it added. Though NRI investments under Schedule 4 of FEMA are made on non-repatriation basis, it was not stated in the extant policy that these are domestic investments.

Also, the Union Cabinet meeting, chaired by PM Narendra Modi, approved the proposal that NRI includes OCI cardholders as well as PIO cardholders.

This decision is to align the FDI policy with the stated policy of the government to provide PIOs and OCIs parity with NRIs in respect of economic, financial and educational fields.

In this regard, the government decided to amend the FDI policy to incorporate the definition of NRI as an individual resident outside India who is a citizen of India or is an ‘OCI cardholder within the meaning of section 7 (A) of Citizenship Act, 1955. Also, according to the cabinet decision, PIO cardholders registered as such under a notification issued by the Centre are deemed to be “OCI cardholders”.

The facility of investment on non-repatriable basis under Schedule 4 of FEMA was introduced to provide NRIs an investment option for utilization of domestic resources, which were not freely repatriable. The scheme was to provide NRIs an incentive to bring funds into India without repatriation rights, at a time when foreign exchange reserves were limited and capital inflows were modest. “The provision should continue to incentivise investments by NRIs, including OCIs and PIOs, resulting in increased investments in the country,” the statement said.

In the FDI policy reforms, the Modi government has so far opened up the entire range of rail infrastructure to 100% FDI under automatic route, and in defence, the sectoral cap was raised to 49%. To boost infrastructure creation, the government reviewed FDI policy in the construction sector also, by creating easy exit norms, rationalizing area restrictions and providing due emphasis to affordable housing. To give impetus to the medical devices sector, the government permitted 100% FDI in it. To expand insurance cover to its large population and provide required capital to insurance companies, the government raised the FDI limit in the sector to 49%. The pension sector has also been opened to FDI up to the same limit. During October 2014 and March 2015, FDI inflow recorded growth of 38% from $ 18.13 billion to $24.95 billion.

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