Govt May Soon Clear The Air On FDI Policies Across Sectors: Report

As the economy looks ahead to an economic slowdown, the Indian government is looking to enable the markets by opening up foreign investments.

Media reports have now surfaced that the government is tweaking foreign direct investment (FDI) limits in aviation and insurance intermediation, along with clarificatory notes that will clear up grey areas in the FDI policy.

The report further added that in the manufacturing segment, grey areas are products manufactured through a contractor and then tried to be sold in the market. Further, a clarification for 100% FDI in contract manufacturing, as also its sale within India by the original brand owner, is being considered. This is expected to benefit tech giants such as Apple, who have been struggling to manage regulatory conditions in the country for the longest time.

The government is also reportedly taking forward its plans for relax in rules in single-brand retail where up to 49% is allowed through the automatic route. The report said that officials were looking at proposals to allow local sourcing norms requirement to be met in 8-10 years, instead of five.

The government will also look at increasing FDI limit in airlines, a move which was earlier bitterly resisted by many Indian airlines including the now-defunct Jet Airways. Officials said the government was planning to relax the cap of 49%FDI under the automatic route for airlines.

Further, another media report added that the government is likely to come out with a clarification on the applicability of the FDI policy on the digital media sector. The reports said that since in the FDI policy, digital media does not find a place, the government is now examining if it will come under FDI cap or not.

Further, it is being suggested that the government will also offer clarifications on Foreign Portfolio Investors (FPI) to ensure they do not come under the ambit of the super-rich tax. It is to be noted that a super-rich surcharge was introduced in union budget 2019 on individuals and groups of individuals who earned more than INR 2 Cr annually.

The tax surcharge is also applicable to FPIs as they mostly function as trusts. In all, foreign investors took out $1.8 Bn from Indian stock markets last month, after the announcement of the tax.

Further, the report added that a tweak in the definition of trusts was being considered as a way out of this logjam. This would be done by the income-tax department, while the FDI policy changes would be ushered in by the DPIIT.

Foreign investments are considered crucial for India, which needs billions of dollars for overhauling its infrastructure sector such as ports, airports and highways to boost growth.