Government of India and RBI take Various Measures to Boost Foreign Investment Flows

The level of foreign investment inflows depends on a number of factors like the return on investment, prevailing interest rates, the rate of growth of the gross domestic product, the levels of inflation, global financial conditions, outlook on exchange rate, etc. Of the two components of foreign investment, Foreign Institutional Investor (FII) investment is more dependent n short-term outlook and the Foreign Direct Investment (FDI) on the long-term outlook and policies of the Government in this regard. No direct relationship can be observed between the levels of inflation and the inflows into the country.

The Government of India and the Reserve Bank of India (RBI) have undertaken various measures to boost foreign investment inflows and make India as an attractive investment destination. The limit for foreign investment in Government dated securities was enhanced in June 2013 to US$ 30 billion. FDI norms and routes were again modified for certain sectors in August 2013. For instance, FDI limit was raised from 74% to 100% (upto 49% under automatic route and above 49% under government route) in telecom sector and asset reconstruction companies. The extant FDI limits in sectors viz, petroleum and natural gas, courier services, commodity exchanges, infrastructure companies in the securities market and power exchanges were allowed under automatic route instead of approval route. Foreign investment limit in credit information companies was raised from 49% under government route to 74% under automatic route. In Union Budget 2014-15, the Government has raised the composite limit of foreign investment in defence manufacturing and insurance sector from 26% to 49% with full Indian management and control through the FIPB route. The RBI on July 24, 2014 enhanced the investment limit in government securities available to FIIs/qualified foreign investors/foreign portfolio investors by US$ 5 billion by correspondingly reducing the amount available to long term investor from US $ 10 billion to US $5 billion within the overall limit of US$ 30 billion.

This information was given by the Minister of State for Finance, Smt. Nirmala Sitharaman in written reply to a question in Lok Sabha today.