Playing with Foreign Investment Policy

The recent amendments to India’s foreign direct investment (FDI) policy seek to increase the scope for foreign investment through multiple ways: raising the sectoral caps, withdrawing the sub-limits within the overall composite caps and minimising the requirement of government approvals. The amendments cover several key sectors: defence, broadcasting, private sector banks, non-scheduled air transport service, ground handling services, plantations, single brand retail trade, construction, and credit information companies.  

The process of “attracting investment to create jobs” by amending the FDI policy, also underlined in the Union Budget for 2015–16, was initiated by the National Democratic Alliance government in August 2014. The first major step was to raise the cap on foreign investment in defence sector enterprises from 26% to 49%. This was followed by permitting FDI in rail infrastructure, relaxing the conditions relating to construction development sector, clarifying the policy towards FDI in medical devices, raising the cap for the insurance sector, pension funds, etc.