Inter-ministerial consultations to allow FDI in respect of certain activities of Railways are being undertaken. No final decision in the matter has been taken.

Review of the FDI policy of the country is an ongoing process and Government has taken a number of steps in the recent past to make India an attractive investment destination.

As regards proposal to increase the cap in some sectors, Finance Minister, in his Budget Speech, given on 10.7.2014, has made following statement:

“The policy of the NDA Government is to promote Foreign Direct Investment (FDI) selectively in sectors where it helps the larger interest of the Indian Economy. FDI in several sectors is an additionality of resource which helps in promoting domestic manufacture and job creation. India today needs a boost for job creation. Our manufacturing sector in particular needs a push for job creation.

India today is the largest buyer of defence equipment in the world. Our domestic manufacturing capacities are still at a nascent stage. We are buying substantial part of our Defence requirements directly from foreign players. Companies controlled by foreign governments and foreign private sector are supplying our Defence requirements to us at a considerable outflow of foreign exchange. Currently we permit 26 per cent FDI in Defence manufacturing. The composite cap of foreign exchange is being raised to 49 per cent with full Indian management and control through the FIPB route.

The Insurance sector is investment starved. Several segments of the Insurance sector need an expansion. The composite cap in the Insurance sector is proposed to be increased up to 49 per cent from the current level of 26 per cent, with full Indian management and control, through the FIPB route.

To encourage development of Smart Cities, which will also provide habitation for the neo-middle class, 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 capitalisation requirements, with the condition of three year lock-in. FDI in the manufacturing sector is today on the automatic route. The manufacturing units will be allowed to sell its products through retail including E-commerce platforms without any additional approval.”

The information was given by the Minister of State (Independent Charge) of the Ministry of Commerce & Industry Smt. Nirmala Sitharaman in a written reply in Rajya Sabha today.

FDI policy reform expands sectoral access and eases entry conditions while preserving management control safeguards. Inter-ministerial consultations are in progress to permit FDI in certain railway activities as part of a broader review to attract investment. The Budget statement proposes raising composite caps in defence and insurance with full Indian management and control via the FIPB route; reducing Smart City built-up area and capital thresholds with a post-completion lock-in; exempting projects allocating a defined share to affordable housing from minimum area and capitalisation requirements subject to lock-in; and retaining manufacturing FDI on the automatic route while allowing retail including e-commerce sales of manufactured products.