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India relaxes conditions for foreign investment

Posted by | August 2, 2013 .

India’s cabinet relaxed the conditions for foreign direct investment (FDI) in the multi-brand retail, telecoms and defence sectors, in an effort to reinvigorate a slowing economy, news reports said Friday

The decision late Thursday came after Finance Minister P Chidambaram said the government was looking at further liberalisation of FDI limits to woo investment in order to tackle a widening current account deficit.

The government will allow foreign retailers to set up outlets in cities with a population of less than 1 million. Previously they were only allowed to set up in cities with a population of 1 million and above.

Several regulations on sourcing and mandatory investment have also been relaxed.

The rule that foreign supermarkets have to source 30 per cent of their products from small and medium Indian firms remains in place, but they have now been given five years to reach the target allowing them to initially import goods.

An earlier limit that sourcing should be done from small and medium enterprises with a turnover of 1 million dollars has been increased to 2 million dollars.

The cabinet also approved raising the existing 74 per cent foreign investment cap in telecom firms to 100 per cent, and said investment in the defence sector could rise above the current 26 per cent cap on a case-by-case basis.

India is seeking to attract foreign investment to help revive its economic growth that slumped to a decade low of 5 per cent in the financial year ending March 31. (dpa)

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