Government has announced several steps to promote Foreign Direct Investment(FDI) selectively in sectors where it helps the larger interest of the Indian economy. Announcing this during his maiden Budget Speech in the Lok Sabha today, the Finance Minister Shri Arun Jaitley said that composite cap of foreign exchange is being raised from the existing 26 per cent FDI to 49 per cent in defence manufacturing with full Indian management and control through the FIPB route.

The composite cap in the insurance sector is being increased upto 49 per cent from the current level of 26 per cent with full Indian management and control through the FIPB route. Announcing this, Shri Jaitley said that the insurance sector is investment starved and several sectors of the insurance sector need an expansion.

To encourage development of Smart Cities, requirement of the built up area and capital conditions for FDI is being reduced from 50,000 square metres to 20,000 square metres and from USD 10 million to USD 5 million respectively with a three year post completion lock in.

To further encourage this, projects which commit at least 30 per cent of the total project cost for low cost affordable housing will be exempted from minimum built up area and capitalization requirements, with the condition of three year lock-in.

In the manufacturing sector, the Finance Minister announced that the manufacturing units will be allowed to sell its products through retail including e-commerce platforms without any additional approval. FDI in the manufacturing sector is today on the automatic route.

Foreign direct investment liberalisation increases sectoral caps and eases conditions for defence, insurance, smart city and manufacturing investment. The government raised composite foreign equity caps to 49 per cent in defence manufacturing and insurance with full Indian management and control via the FIPB route; relaxed Smart City FDI thresholds and imposed a three-year post-completion lock-in, with an exemption for projects allocating at least 30 per cent to low-cost affordable housing; and permitted manufacturing units with FDI to sell through retail and e-commerce without additional approvals, with manufacturing FDI remaining on the automatic route.