The report added that any changes could be part of the budget announcement.
The Department of Industrial Promotion and Internal Trade is currently examining ways to make investment criteria more attractive to attract manufacturing to the defence sector. Current rules allow 100% FDI where state-of-the-art technology is used or “any other reason may be recorded”.
Up to 74% FDI is permitted under the automatic route, but this comes with various conditions, which may be subject to review, such as the requirement of industrial licenses for certain sectors and production of small arms.
The automatic route allows FDI up to 74 percent but comes with conditions such as industrial licences for certain sectors and production of small arms, some of which may be subject to review, the report said.
In the insurance sector, which has been a contentious area since it was opened up to foreign companies 25 years ago, there is a 74% cap on FDI in general or life insurance companies, while 100% FDI is allowed in insurance intermediaries. General insurance companies often become profitable after a few years, generating funds for reinvestment. However, life insurance remains a capital-intensive industry, requiring capital infusions from Indian and foreign partners over a period of six to seven years. The review comes in the wake of increased competition in the sector, with most life insurance companies now profitable. In plantations, insurance and plantation licences may become difficult to obtain as the objectives of the review of the sector are unclear. Currently, 100% FDI is allowed in tea, coffee, rubber and a few other sectors. The BJP has previously opposed raising the limit in this sector, so the Indian National Congress and its allies are likely to resist any particularly controversial changes to the law.
Officials stressed that the review is aimed at adhering to timelines for inter-agency processes that can be inconsistent, particularly where security clearances are required, and facilitating smooth investment flows.
Officials told TOI that the review was aimed at ensuring a smooth flow and also to ensure that timelines involved in inter-ministerial processes were adhered to, which were not always being followed, especially in cases where security clearances were required.
