In a significant move aimed at expediting flow of foreign investment into the country, the Union Cabinet on Thursday liberalised the foreign direct investment (FDI) policy further by allowing the Foreign Investment Promotion Board (FIPB) to clear proposals from overseas entities worth up to Rs. 1,200 crore, against the existing limit of Rs. 600 crore.
With Thursday’s approval, only proposals involving total foreign equity inflow of more than Rs. 1,200 crore would be placed for consideration of the Cabinet Committee on Economic Affairs (CCEA). The recommendations of FIPB on proposals with total foreign equity inflow of and below Rs. 1,200 crore will be considered by the Finance Minister for approval.
The decision was taken at a meeting of the Cabinet Committee of Economic Affairs (CCEA) chaired by Prime Minister Manmohan Singh.
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Under the new dispensation, only foreign investment will be considered while deciding whether the project will be put up before CCEA against the earlier practice of taking into account the total project cost.
Addressing a press conference here, Union Commerce and Industry Minister Anand Sharma said the proposal mooted by the Commerce Ministry and approved by the CCEA, was expected to expedite foreign investments and save time and effort of CCEA and FIPB. “This is the first time since 1991, when FDI policy was introduced, that an amendment has been made in the policy at this scale. Foreign investors need not seek fresh approvals from the government or FIPB in sectors that have been transferred to the automatic route or where FDI caps have been removed,” he added.
Stating that India was attracting FDI as a favourite destination, Mr. Sharma said despite the global slowdown, India had recorded 13.2 per cent increase in December at $1.54 billion against $1.36 billion in December 2008, as per the RBI. The FDI equity inflows during April-December this fiscal was $21.5 billion, marginally up from $21.15 billion in the previous fiscal.
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Mr. Sharma said that there had been an increase of 13 per cent in FDI inflows in December, reflective of the trend seen from June 2009 onwards, wherein FDI inflows for almost all months in the current financial year (except September, 2009) have shown an increasing trend over the same months in the previous financial year (2008-09). “Keeping in view this momentum, it is quite likely that total inflows in the current financial year (2009-10) will exceed the total inflows received during the last financial year (2008-09),” he said.