By TIOL News Service

NEW DELHI, AUG 05, 2015: COMMERCE & Industry minister Nirmala Sitharaman informed the Parliament that India's foreign direct investment (FDI) policy is one of the most liberalized regimes in the world. Sitharaman said, Government has put in place an investor-friendly policy on FDI, under which FDI, up to 100%, is permitted, under the automatic route, in most sectors/activities. Significant changes have been made in the FDI policy regime from time to time, to ensure that India remains increasingly attractive and Investor-friendly.

Government has undertaken a number of steps to improve Ease of Doing Business in India. Amongst the other important steps, Ministries and State Governments have been advised to simplify and rationalize the regulatory environment through business process reengineering and use of information technology.

These measures are expected to increase FDI, which complements and supplements domestic investment. Domestic companies are benefited through FDI, by way of enhanced access to supplementary capital and state-of-art-technologies; exposure to global managerial practices and opportunities of integration into global markets resulting into accelerated domestic growth of the country. Further, as FDI is largely a matter of private business decisions, global investors normally take time to assess a new policy and its implications in the context of a particular market before making investment.

In the light of the importance of FDI for economic growth and development, the government announced key reforms in the defence and railways sectors. The entire range of rail infrastructure was opened to 100% FDI under the automatic route, and in defence, sectoral cap was raised to 49%. To boost infrastructure creation and to bring pragmatism in the policy, the Government reviewed the FDI policy in the construction development sector also by creating easy exit norms, rationalizing area restrictions and providing due emphasis to affordable housing.

To give impetus to the medical devices sector, a carve out was created in FDI policy on the pharmaceutical sector and now 100% FDI under automatic route is permitted. The Government, in order to expand insurance cover to its large population and to provide required capital to insurance companies, raised the FDI limit in the sector to 49%. Pension sector has also been opened to foreign direct investment up to the same limit. The FDI policy provisions pertaining to NRI investment have also been clarified by providing that for the purposes of FDI policy, investment by NRIs on non-repatriation basis under Schedule 4 of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations will be deemed to be domestic investment at par with the investment made by residents.