In an effort to simplify the foreign direct investment regime, the department of industrial policy and promotion has moved a note to the Cabinet to do away with the distinction between different types of foreign investments through a composite cap on foreign investments.
The move, aimed to promote ease of doing business in India, was announced by Finance Minister Arun Jaitley in the budget last month.
“We have attempted to incorporate suggestions by various departments and ministries. Investors want clarity in policies for safety of their investments. The aim is to attract foreign investment by clearing ambiguity in the existing FDI policy related to sectoral caps and conditionality.
The composite foreign investment caps will encompass all types of foreign investments. These will include foreign portfolio investment, NRI investment and depository receipts, and will include foreign currency convertible bonds and fully and mandatorily convertible preference shares or debentures.
DIPP had floated the note for interministerial consultation last year but met with resistance from certain ministries including the departments of pharmaceuticals and economic affairs. Composite cap is already applicable in sectors including defence, telecom and insurance.
“The move will be significant for sectors that have a sectoral cap. It will bring in a lot more clarity on how the cap is to be calculated. The companies should know how much room they have to bring in foreign investment”.
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