By TIOL News Service

NEW DELHI, JULY 10, 2014: LOUDLY driving home the point to foreign investors that FDI is certainly welcome to contribute towards the revival of the Indian economy-on-slide, the Union Finance Minister today proposed several liberalization measures in the matrix of FDI guidelines and regulations for the various sectors.

Insurance and Defense Sector

The Insurance Regulatory & Development Authority has been long lobbying with the Finance Ministry for increasing the FDI cap so that sufficient funds could be infused in these companies to tap the huge Indian hitherto unexploited insurance market. Their stand has been that the Insurance sector is presently investment-starved and eagerly looking for foreign investments. The long wait both for the Indian insurance companies as well as the potential foreign investors seems to have come to an end with this proposed hike in the threshold.

India is one of the largest purchasers of defense equipments in the world. Therefore, a strong necessity was always felt that instead of inflating the import bill of the country, which in turn contributes in widening the fiscal deficit, the defense companies across Europe and US should be allowed to make inroads in the Indian setup.

Both in the Defense and Insurance sector, the FDI caps have been raised from 26% to 49%., which shall be allowed through the FIPB route. However, sufficient caution has been exercised to protect the interests of the nation and the expected attack of the Swadeshi voice, the aspect of control and management has been strictly restricted in the hands of the Indian. It may be noted that a clarification would soon be required with respect to this, as the definition of “control and management” has historically been a bone of contention transmitting bone-chilling shivers down the spine of the political masters.

Smart cities

Working in tune with the ambitious plan of Modi Sarkar to develop new cities and reduce the strain on existing metros, “smart Cities” concept has been introduced. For promoting investment in these smart cities requirement of the built up area and capital conditions for FDI is being reduced from 50,000 square metres to 20,000 square metres and from USD 10 million to USD 5 million respectively with a three year post completion lock-in.

E-commerce

Finally, Mr Jaitely also announced that the manufacturing units will be allowed to sell its products through retail including e-commerce platforms without any additional approval. This will act as booster thrust to the already booming e-commerce market in India. The US giant e-commerce companies like Amazon and e-bay are going to be big time gainers from this further step of liberalization. Although one may see some contrast in news reports like one of the mega French retailer is contemplating quick exit from India.