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Government may ease FDI norms for NRIs to boost capital inflow in Defence, Railways |
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NEW DELHI: The government is set to liberalise foreign direct investment norms for non-resident Indians as part of its efforts to boost capital flows in sectors such as defence and railways.
The department of industrial policy and promotion (DIPP) has sought Cabinet approval to allow NRI non-repatriable funds to be considered on a par with domestic investment instead of FDI and exempted it from sectoral restrictions, limits and approvals.
The move is expected to give a big push to sectors such as defence that require large investments, in line with the 'Make in India' campaign launched by Prime Minister Narendra Modi.
"In order to encourage NRIs to put in their money in India, we are trying to allow non-repatriable investment as domestic and not FDI. We have sought approval of the cabinet in this regard," said a government official, who did not wish to be identified. Non-repatriable investment is one that an NRI cannot take back to the foreign country.
"This will be an absolute game changer for FDI restricted sectors. Many sectors including retail, defence, etc, have NRI non-repatriable investment. When they want to issue shares to NRIs over the sectoral limit, they do not get approvals. This will be a very big move for defence, I&B, retail and others. It will make sectors very open," said Girish Vanvari, national head of tax at KPMG India.
The government had last year set up a committee to look into the possibility of treating non-repatriable NRI funds as domestic investment. The Modi government has liberalised FDI norms for a slew of sectors including defence, railways, medical devices and insurance, and it is keen to tap into foreign capital, including from NRIs.
We want NRI money to flow in directly. They have a lot of money and want to invest here. We will allow people to invest in dollars and let them earn in rupees. We want them to put money in defence, railways, etc," said the official cited earlier. The move, if approved, will allow NRIs to invest in the country without taking government approval that is a prerequisite for a number of sectors.
Civil aviation sector is an exception as it already allows NRIs to invest up to100% against an FDI cap of 74% cap for scheduled air transport service and up to 49% for non-scheduled air carriers.
The higher capital flows could also help finance the current account deficit, estimated by the economic survey at 1% of GDP during 2015-16. The move could be seen as part of efforts to promote ease of doing business in the country, a parameter on which India is ranked a poor 142 out of 189 countries in World Bank's report.
The Modi government is aiming to push India into the top 50 countries in the next few years. FDI inflows grew 24% during the nine months to December in the current fiscal. In the past few months, the government has opened up railways infrastructure to 100% foreign funding and raised the FDI cap in defence to 49% from 26% earlier.
It wants to indigenise defence production and reduce dependence on imports. In a policy change in August last year, it allowed more than one Indian company to hold 51% share, leading to a slew of approvals involving private players that had been pending for the last five-six years.
Source : economictimes.indiatimes.com
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