The Indian government on Friday [July 5] said it will consider further liberalizing foreign direct investment (FDI) rules in certain sectors, part of its efforts to make Asia’s third-largest economy a more attractive investment destination.
Presenting the annual budget for 2019/20, Finance Minister Nirmala Sitharaman said the government would hold discussions with stakeholders to relax FDI rules in the aviation, media, animation and insurance sectors, and ease rules for single-brand retailers.
“I propose to further consolidate the gains in order to make India a more attractive FDI destination,” Sitharaman said.
Broadening access to India’s economy for foreign investors could help Prime Minister Narendra Modi, who won a thumping election majority in May but is still battling a slowdown in economic growth and foreign inflows.
The government’s move to ease FDI rules is also seen aimed at assuaging concerns of foreign investors who have become wary of India’s investment climate of late, especially after new FDI rules for the e-commerce sector were seen as protectionist.
Sitharaman did not provide many details about the proposals, but there are plenty of clues about the directions the government may be heading in a government document, dated May 3, seen by Reuters. And they may be more ambitious than those made public on Friday.
That document outlined what it called the “justification” for easing FDI rules for seven sectors, including single-brand retail and insurance – which Sitharaman mentioned on Friday.
The document also laid out FDI proposals for digital media, contract manufacturing, coal mining, certain plantation crops and firms that store financial information for bankruptcy proceedings.
The proposals included the extension of FDI limits in some of the sectors, while easing rules for others. Told about the plans listed in the document, three senior Indian officials told Reuters last month the proposals had been in the works for some time.
At the time two top officials, Secretary of India’s industries department Ramesh Abhishek and Additional Secretary Shailendra Singh, told Reuters there were no FDI changes under consideration, calling Reuters findings based on the government document speculative. The industries department is the key ministry for FDI reforms…