The government is planning a big push for foreign investment. According to sources, two major decisions are likely to be taken very soon.
One of the proposals is to increase the limit for FDI approval from the current Rs 5,000 crore to Rs 15,000 crore for the Cabinet Committee on Economic Affairs (CCEA). Along with increasing the limit, the government is also considering to relax the rules for FDI in downstream companies.
The Cabinet Committee on Economic Affairs (CCEA) is a high-level panel of the Indian government led by the Prime Minister. It makes major decisions on economic policy, big financial investments, price controls, and foreign investments to speed up governance and growth
A Cabinet draft note has been prepared on these proposals. Preliminary discussions have been held between the Ministry of Finance, DPIIT and NITI Aayog. Very soon, the Cabinet may take up these proposals for approval, sources added.
At present, foreign investment proposals above Rs 5,000 crore have to go to the CCEA for approval. Proposals below Rs 5,000 crore are cleared by the concerned ministry. The Rs 5,000 crore limit has been in place since November 2015.
Now, according to the proposal, this limit will be increased from Rs 5,000 crore to Rs 15,000 crore. This means FDI proposals of up to Rs 15,000 crore will not need to go to the CCEA. They may get approval at the concerned ministry level only.
If the proposal is approved, ministries will be able to clear more large investment proposals without sending them to the CCEA. This could help reduce the time taken for approvals. Sources said the government is looking at increasing the limit because the size of the Indian economy and investments has grown over the years. The move is also aimed at improving ease of doing business.
The government is also looking at changes in FDI rules for downstream companies to facilitate overseas capital inflows. Under the proposal, an Indian company receiving indirect foreign investment may not need to seek fresh government approval if the domestic company higher up in the ownership chain has already obtained the required approval.
At present, prior government approval is required for downstream or indirect foreign investment in two broad situations, investments in sectors where FDI is under the government approval route, and investments involving entities from countries that share a land border with India.
The proposed changes could reduce the need for repeated approvals in cases where the relevant investment has already been cleared at an earlier stage of the ownership structure. This could reduce repeated approvals and make it easier for foreign money to come into India.
