The revised Foreign Direct Investment caps for various sectors will be in place by second or third week of July, said Finance Minister P. Chidambaram. At the same time, he said that there was no room for pessimism on rupee.
The revised FDI cap is based on the recommendations of Arvind Mayaram Panel. The panel has recommended three caps, 49 per cent, 74 per cent and 100 per cent against the present 26, 49, 74 and 100 per cent. The panel has suggested raising caps in key sectors such as defense, multi brand retail, print media, news channels, stock exchanges, besides others.
“Department of Industrial Policy and Promotions (DIPP) will consult every Ministry before bringing a note to the Cabinet,” Chidambaram said at the sidelines of an event organised by Crisil. Economic Affairs Secretary Arvind Mayaram has already sent a letter to DIPP Secretary Saurabh Chandra for a consultation with various Ministries in the first or second week of July.
The panel has said that considering the adoption of the principle of ownership and control, the revised definition of which is being proposed by the DIPP, there will be only three categories of activities.
First, where foreign ownership and control cannot be allowed, there 49 per cent FDI will be permitted with the definition of control.
Second, in sectors or activities where ownership and control (Indian or foreign) is not material, FDI will be 100 per cent on automated routes.
The third category will be one where though foreign ownership and control is permitted, a degree of Indian participation or oversight is also considered necessary. In these 74 per cent FDI with FIPB (Foreign Investment Promotion Board) oversight is recommended.
Rupee, Foreign inflow
FDI cap revision is taking place at a time when rupee is almost touching historical low of Rs 60 a dollar level.
Outflow of over $5 billion by FII during first 20 days of June is one of the reasons for the dip in rupee. But the Finance Minister is hopeful that money will come back.
“Nothing changed during these 20 days. Indian economy has not weakened after Bernanke’s statement,” he said. It may be recalled that US Federal Reserve’s chief Ben Bernanke had talked about phasing out of Quantitative Easing which caused Indian and Emerging markets’ stock market and currencies to go down.
“We think that Bernanke’s statement was either ill timed or completely misunderstood,” Chidambaram felt.
He hoped that with good monsoon, bumper foodgrains stock, better prospect of Rabi crops, efforts to push stalled projects, and expected key decisions on Thursday will improve the sentiments.