The Department for Promotion of Industry and Internal Trade (DPIIT) has paused its plans for an overall review of the Foreign Direct Investment (FDI) policy, including sectors such as defence, insurance & banking and plantation where there is scope for some more easing. It would, instead, focus on continuing with its policy of tweaking rules and improving processes as and when required, sources said.

The thrust would also be on procedural changes including bringing down the time taken for clearance of proposals.

“There were some inter-ministerial consultations that were held on an overall review of the FDI policy but it did not yield definitive results. So it is likely that the present policy of review of the FDI policy on an on-going basis and bringing about changes as and when required would continue,” the official said.

The government is also right now not making any changes to the policy for FDI applications from countries sharing land border with India like China, which have to mandatorily seek government approval for all sectors, the official added.

While India allows 100 per cent FDI through the automatic route in most sectors, there are caps in some sensitive sectors which have been progressively liberalised. 

Automatic route

In the recent past, reforms in the FDI policy have been undertaken in sectors such as defence, insurance, petroleum & natural gas and telecom. FDI in defence sector is now allowed up to 74 per cent (from earlier 49 per cent) through automatic route for companies seeking new industrial license. In insurance sector, FDI limit has been raised from 49 per cent to 74 per cent for insurance companies under the automatic route and foreign ownership and control has been allowed with safeguards. FDI up to 20 per cent in Life Insurance Corporation of India (LIC) has been permitted under automatic route. Further, FDI up to 100 per cent under the automatic route has been permitted in telecom sector.

“Earlier this year, the government liberalised FDI rules for the space sector after inter-ministerial consultations and stakeholder discussions. Further liberalisation of the FDI policy is likely to continue on the same lines with focus on a particular sector when required,” the official said.

International investments

With the recent easing of FDI norms and stress on cutting down time for clearance of proposals, the DPIIT is hopeful of increasing annual FDI inflow to $100 billion from about $70-80 billion, DPIIT Secretary Amardeep Singh Bhatia recently said.

Bhatia also said that at present there were no plans of changing the policy laid down in press note 3 on investments from China and other bordering countries. The present mandate is that investments from land border nations shall be permitted only with prior government approval. The objective was to prevent opportunistic takeovers or acquisitions of Indian companies.

However, the Economic Survey for 2023-24 released in July advocated increasing FDI from China to boost exports from the country.

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