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Home > Business > Business Headline > Report

Ministerial group set to ease FDI caps

BS Bureau in New Delhi | February 21, 2003 12:25 IST

A group of ministers is meeting on Friday to consider proposals to increase the foreign investment ceilings in insurance, telecommunications and aviation.

Also on the agenda are easier norms for foreign investment in banks, small industries and petroleum retailing.

The group's decisions will be sent for Cabinet approval next week, after which they will be incorporated in the big reforms package Finance Minister Jaswant Singh is expected to announce in the Budget on February 28.

A senior government official said though the aviation ministry had recommended foreign airlines be barred from investing in local ones, the ministerial group would consider the recommendation of a committee headed by Planning Commission member N K Singh to allow foreign participation.

In fact, the committee's report is being taken up in its entirety.

The source said some ministries had opposed changing the sector caps on foreign investment. But the ministerial group is expected to overrule them, largely at the instance of the prime minister's office and the finance minister.

The proposal to raise the foreign investment ceiling in telecommunications from 49 per cent to 74 per cent will, if it goes through, make several companies like Hutchison Whampoa and Singapore Telecom review their investment plans in India.

It could shake out the industry, helping local players wanting to get out of their not-too-profitable ventures.

The group is also expected to hike the foreign investment limit in insurance from 26 per cent to 49 per cent, despite opposition from political parties, including some ruling National Democratic Alliance partners.

The export obligations for foreign investors in the small-scale sector are due for a change, while the government might ease norms in the pharmaceuticals (genetic recombinant) and oil exploration businesses.

If the proposals are made a part of the Budget, the parliamentary session might see fierce debate. But the prime minister's office and the finance ministry feel this could be their best chance to give reforms a push.

Run-up to the Budget 2003


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