The Finance Ministry is scripting a new liberal foreign investment policy framework to help lift the economy out of a prolonged slump as part of plans to stimulate overseas interest. This will allow at least 49% investment in all sectors,.Moreover, the Ministry will propose that the minimum 49% investment is allowed through the automatic route, barring a few strategic ones, without requiring time-consuming government approval. Nowadays, Ministry is encouraging Indian-owned and controlled companies so that they do not face undue scrutiny. It is expected that defence, railways, e-commerce and media will be significant beneficiaries in this round of liberalization.
The proposal could also offer a way to settle the issue over FDI in multi-brand retail. The BJP, in its manifesto, opposed allowing entry to foreign retailers. Scaling back FDI in the sector to 49% could be a compromise solution. Arun Jaitley, Minister for Finance and Defence, has already indicated that he will look into the issue of FDI in defence. The ministry will also propose a simplification of policy that will end differentiation among various forms of overseas investment through a composite cost structure. A composite cap formulation could be acceptable for the insurance and pension sectors as well, where the change would have to be carried out through legislation. The policy paper will focus on industrial sectors as captured in the National Industrial Code to give better clarity to foreign investors.
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