Govt Relaxes FDI Regime; Telecom, Insurance, Retail, Media To Benefit

Here is the new Foreign Direct Investment regime that will rewrite the rules for FDI at least in sensitive sectors like telecom, media, aviation, banking defence, and insurance. The Cabinet Committee on Economic Affairs (CCEA) on Wednesday approved new guidelines for computation of foreign equity in Indian companies.

The crux of the new guidelines is that the management and economic control would be the defining criterion for determining whether or not a foreign holding in a company was to be treated as FDI. In other words, any notion of indirect or proportionate foreign holding has been done away with.

So if an investing company is majority Indian-owned/controlled, then the foreign holding in that company will not be counted as FDI when it makes an investment in another company. Such investments will be counted as purely Indian.

Such a move will pave the way for foreign investment beyond the existing ceiling in sectors such as telecom, insurance, media, defence, retail and so on.

What Will Be Considered As FDI

The ownership and control will be the chief determinant for FDI now. So investments by any company which has a majority foreign stake will be considered entirely as FDI. Take the example of Hindustan Unilever

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