Panel for raising FDI limit to 49 % in almost all sectors

Prime Minister Manmohan Singh will be meeting senior Cabinet colleagues on Tuesday to discuss reforms in the foreign direct investment (FDI) norms and caps in various sectors, including defence, multi-brand retail and telecom on the lines of what was recommended by the Arvind Mayaram committee.

The Defence Ministry has raised a strong objection to hiking the FDI limit in the defence sector from 26 per cent to 49 per cent, and this was conveyed by Defence Minister A. K. Antony in a letter to Commerce and Industry Minister Anand Sharma recently. However, the Finance Ministry and the Commerce and Industry Ministry are strongly in favour of raising the FDI limit in defence. They are of the view that the objections raised by the Defence Ministry could be incorporated in the policy guidelines while hiking the limit.

In addition, FDI in the pharmaceutical sector for acquisition of brownfield projects is also likely to come up for discussion. Mr. Sharma had recently written to the Prime Minister seeking an urgent review of the present FDI policy in pharma as it was encouraging acquisition of brownfield projects and no investments were coming in the greenfield projects, which could have serious repercussions for the long-term production of generic drugs in India. Apart from Mr. Sharma, Finance Minister P. Chidambaram and Mr. Antony are likely to be part of the meeting.

Issues pertaining to the concerns raised by the CEOs and multi-national companies in the multi-brand retail format are also likely to come up for discussion during the meeting. The committee has recommended that FDI limit be raised to 49 per cent in almost all sectors through the automatic route.

FDI inflows in 2012-13 aggregated $22.42 billion against $36.50 billion in 2011-12. The government, faced with widening current account deficit (CAD), is keen on increasing FDI ceilings to attract more overseas investments. CAD has been estimated at 5 per cent of gross domestic product (GDP) in 2012-13 as against the comfort level of 2.5 per cent.

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