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Composite foreign investment caps in Cabinet today

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The Cabinet is likely to consider a proposal on Thursday to merge limits of foreign direct and portfolio investments into composite caps to make foreign investment regime easier.
The department of industrial policy and promotion (DIPP) had prepared a Cabinet note proposing a combined cap in most sectors where foreign direct investment (FDI) is allowed or where foreign institutional investors (FII) have a separate limit.
Composite caps have been suggested for sectors like agriculture, tea plantations, petroleum and natural gas, manufacturing, airports, real estate, telecommunications, mining, non-banking financial companies and pharmaceuticals.
In some sectors where only FDI and FII investments are allowed now, the department has proposed investments by non-resident Indians and foreign venture capital firms as well. These include up to 100 per cent foreign investment in asset reconstruction companies, 74 per cent in private banking, 20 per cent in public-sector banks and 49 per cent in power exchanges.
The department is of the view that the proposal would provide Indian companies a wider choice of investors. The proposal rejected the contention that portfolio investments were neither lasting nor intended to control a company. It argued there were cases of companies being controlled by portfolio investors, and hence the need for composite caps.
For instance, broadcasting carriage services had a sectoral FDI cap of 74 per cent, of which 49 per cent could come through the automatic route.
Business Standrad, New Delhi, 16th July 2015

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