Who knew that in 1991 ( economic policy), India would come this far and welcome investors with open arms. In the last few years the Nation has changed its policies towards a fruitful object and continues to do so.

I can recall when I was studying economic and business legislations of India that we used to talk about whether the FDI limits would eventually change to bring in more money and a better infrastructure or would Indians be driving on those bumpy roads and suffer in jams with its overgrowing population due to lack of adequate flyovers; will there be enough place at its airports to accommodate the immense increase in air traffic to India or for that matter will there be airlines other than Air India/Indian Airlines/a few more. Today the picture as changed and seems like we have the right people on board to gauge the needs of the hour.

Yesterday, 30th January 2008, the Government of India (GOI) showed how liberal it’s getting in its policies. The Cabinet Committee on Economic Affairs (CCEA) announced the following increases in the FDI limits in 7 sectors. Lets have a look below :

Sector/activity                                                           New Limit (max)        Old Lmit

oil refinery joint ventures with public-sector              49                                      26
oil firms  (1)

ventures involving the trading and marketing of        Deleted a rule
petroleum products. (2)

maintenance, repair and overhaul organisations        100                                   49
(MROs) and flying training institutes, helicopter
and sea-plane services

cargo and non-schedule airlines                                   74

ground handling services
(after requisite security clearances are obtained)`       74

Indian commodity exchanges     (3)                              49

mining and mineral separation of titanium
-bearing minerals and ores (4)                                      100

Credit information companies (5)                                 49

listed credit information companies                              24

Industrial Parks (6)                                                waviers

1. from now on projects could be approved by the Foreign Investment Promotion Board.

2. Done away for this area : to shed up 26 percent of equity in favour of Indian partners or the public within five years foreign firms 

3. foreign direct investors to buy 26 pct and foreign institutional investors to buy 23 pct. though no single investor can buy more than 5 pct stake in them. However 2 limitations here for the foreign investors are:

a. denying him a say in the company

b. not be allowed on commodity exchange boards.

4. The FDI permission would be allowed only if mineral separation by a foreign company is accompanied by investment in local value addition units and transfer of technology. The policy has also clarified that provisions of Press Note 2 (2005) will not apply to industrial parks. 

5. with prior permission from the government 

“The general pattern of foreign investment would be FDI of 26% and FII of 23% in sectors where up to 49% FDI is allowed. However, different sectors may have different combinations for FDI and FII investments”, from India’s information and broadcasting minister

6. waivers on : minimum capital and lock in period

So investors can smile to further liberalised rules.

India hopes to attract foreign investment of $26 billion in the 2007/08 fiscal year ending this March. China made a record US $ 82.7 billion by Dec 2007. Hence a point that might be relevant here is that are these policy decisions in India a lesson learnt from China seeing that its done so well so fast? Why isn’t India proactive to its own benefit?

This entry was posted on Thursday, January 31st, 2008 at 2:14 pm and is filed under India, Government, setting up in India, Regulatory Environment, Investment. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.