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2013-08-02

Govt hikes FDI limits in different sectors, eases policy norms for retail

The government on Thursday decided to hike the foreign direct investment limits in a host of sectors, notably telecom, oil refineries, commodity bourses, power exchanges and stock exchanges and relaxed the policy for retail, giving clear signal to overseas investors that the economic reforms were on track.

The government on Thursday decided to hike the foreign direct investment limits in a host of sectors, notably telecom, oil refineries, commodity bourses, power exchanges and stock exchanges and relaxed the policy for retail, giving clear signal to overseas investors that the economic reforms were on track.

 

The decisions were taken by the federal cabinet chaired by Prime Minister Manmohan Singh.

 

The FDI limit for telecom sector has been increased from 74 percent to 100 percent.

 

To lure international retailers like Walmart, Tesco and Carrefour into the country, the government relaxed policy related to FDI in multi-brand retail.

 

The government has decided to relax the policies related to mandatory sourcing, investment in back-end infrastructure and selection of cities, Commerce and Industry minister, Anand Sharma told reporters after the cabinet meeting.

 

Regarding mandatory sourcing from the SMEs, Sharma said the $2 million investment ceiling for identification of SME was required for at the time of engagement.

 

As per the earlier norms it was mandatory for the overseas investors to source at least 30 percent of goods from SME, which has investment of less than $2 million.

 

There was ambiguity that what will happen if the investment of SMEs crosses $2 million.

 

Sharma said this investment limit would be applicable only at the time of engagement.

 

The government last year had opened the gates for multi-brand retail sector to foreign investors by allowing up to 51 percent FDI.

 

However, no foreign investment has taken place in the sector so far. Global retailers like Walmart, Tesco and Carrefour have been demanding further clarifications in the policy.

 

The FDI inflows to India declined to $22.42 billion in 2012-13 from $36.50 billion recorded in the previous year. The decision is expected to revive the FDI, which is crucially important to finance the current account deficit.

 

Current account deficit, the difference between the country's total imports of goods, services and transfer and their exports, touched a record high 4.8 percent of GDP in the FY ended March 31, 2013.

 

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