Govt looking at raising FDI caps, Chidambaram assures investors
New York: The government is considering raising foreign investment limits in various sectors including defence and insurance, Finance Minister P Chidambaram assured investors Thursday.
To review the Foreign Direct Investment (FDI) sectoral caps, the government has already set up a committee which held its first meeting earlier this month and is likely to meet again soon.
"Let the report (of the FDI committee) come and I feel many caps deserve to be either relaxed or removed," he said addressing the international media here.
On raising FDI cap in the defence sector, Chimdambaram said it was a suggestion mooted by Commerce and Industry Minister Anand Sharma.
"I am sympathetic to it and the committee will have to decide if the cap needs to be reviewed," he added.
There is a need to review FDI sectoral caps, he said, adding: "There were many caps imposed at different points in time. We have set up a committee to go into the nature of each cap and ask a question: Has the cap served a purpose? Does it continue to serve a purpose? If it does, let the cap continue. If it does not, then the cap should either be relaxed or removed".
The government has set up a committee under Economic Affairs Secretary Arvind Mayaram to review the FDI norms in line with the change in definition of FDI.
Currently, there are various sectors where FDI limit is way below 100 percent. While in multi-brand retail it is 51 percent, in telecom and banking it is 74 percent.
While the Cabinet has approved hiking FDI limit in insurance and pension sectors to 49 percent, a bill to that effect is pending in Parliament.
Further, in commodity exchanges, asset reconstruction companies, credit information companies and private security agencies, up to 49 percent FDI is allowed.
Chidambaram said the insurance bill, which seeks to raise FDI cap to 49 percent from 26 percent, is in Parliament and he had discussions with Leader of Opposition of both the Houses.
They have promised to revert after internal consultations within their party, he added.
"The ceiling has got to be at 49 percent some day. Whichever government in office should be persuaded to increase and why not now is the question," Chidambaram said.
In the Budget 2013-14, Chidambaram had highlighted the need to attract foreign funds to finance the rising current account deficit (CAD), which touched a record high of 6.7 percent in the December quarter.
The Budget has also announced steps to come up with an accepted definition of FDI and portfolio investment where a foreign investor with more than 10 percent stake would be treated as FDI.