PM to discuss FDI related issues with Cabinet today
New Delhi: Prime Minister Manmohan Singh will on Tuesday discuss the proposal to hike foreign investment caps in sectors like telecom, retail and defence with his senior Cabinet colleagues.
The other issue which will figure in the meeting is the concerns raised by the Commerce and Industry Ministry on the increasing number of acquisitions of domestic pharmaceutical companies by foreign firms, an official said.
The Department of Industrial Policy and Promotion (DIPP) has raised concerns over a spate of acquisitions of domestic pharma firms by multinationals. It has sought the intervention of the Prime Minister's Office (PMO) on this matter.
"All the FDI related matters are expected to be discussed in the meeting," the official said.
Besides, Commerce and Industry Minister Anand Sharma and Finance Minister P Chidambaram are expected to attend the meeting.
Seeking to promote India as an investment destination, the Finance Ministry last month proposed sweeping changes in the FDI regime, favouring higher sectoral caps in almost all sectors including defence, multi-brand retail and telecom.
Virtually doing away with the 26 percent ceiling, a committee headed by Economic Affairs Secretary Arvind Mayaram has recommended that FDI limit be raised to 49 percent in almost all sectors through automatic route.
The committee has suggested that FDI in defence be raised to 49 percent under the government approval route, from 26 percent at present.
Besides, it has proposed to increase FDI cap to 74 percent and 100 percent in multi-brand retail trading and telecom sector.
Recently, Sharma and Chidambaram were on a four-day visit to the US to woo foreign investments.
FDI inflows in 2012-13 aggregated USD 22.42 billion, a decline from USD 36.50 billion in 2011-12.
The committee has also proposed raising the cap to 49 percent under automatic route in sectors like single-brand retail, existing pharma companies, power and commodity exchanges, PSU banks, tea plantation, print media, PSU petroleum refinery, asset reconstruction companies, stock exchanges, insurance, depositories and clearing corporations and satellite services.
The DIPP has recently held an inter-ministerial consultations on these proposals.
Government is keen on increasing FDI ceilings to attract more overseas investments and finance the widening current account deficit (CAD).
CAD has been estimated at 5 percent of the GDP in 2012-13 as against the RBI's comfort level of 2.5 percent. High CAD puts pressure on the domestic currency and can expose the economy to balance of payments problem.
It also impacts the country's foreign exchange reserves. CAD had touched a record high of 6.7 percent in the October - December quarter. CAD occurs when country's total imports and transfers are higher than its total exports and transfers.