ROLLING OUT THE RED CARPET

Govt may ease rules for more FDI inflow

EXTRAORDINARY situations require extraordinary actions. This appears to be the latest mantra for policymakers and government functionaries. Hectic discussions are on in North Block and Udyog Bhawan to liberalise FDI norms and relax existing regulations in a bid to infuse more investments into the Indian economy.
    The Department of Industrial Policy and Promotion (DIPP) and the finance ministry are working together to do away with the cap on FDI in single-brand retail and allow up to 100% foreign investments. As of now, the policy permits foreign investments up to 51% in single-brand retail. This apart, consultations are on to examine the possibilities of allowing 51% FDI in the multi-brand retail — hitherto an untouchable area for the government.
    The government's recent thinking on easing FDI restrictions comes on the back of the current liquidity crisis which has been compounded with a significant outflow of foreign investments by FIIs. Despite the present difficulties, India is expected to sustain an economic growth of 7%-plus in coming years. The government feels that policy measures are needed to prop up India as an investment destination.
    They are also working on increasing FDI in asset reconstruction companies (ARCs) beyond the existing 49%. And it is not only about FDI caps. The government is also keen to do away with some of the policy hurdles that deterred further investments by foreign companies. The government is willing to allow more ARCs to conduct business in India as it would create a buffer for the country's financial system.
    One such policy irritant which has often led to delays relates to Press Note 1. The government is considering relaxation of PN1 rules which requires a foreign company to obtain a no-objection certificate(NOC) from its existing JV partner before setting up a new venture in the same line of business in India.
    The government is also looking at allowing foreign companies to buy shares from the stock market. As of now, only FIIs are allowed to buy shares from the secondary market through stock exchange deals. The move would step up capital flows, check the stock market slide and arrest depreciation of the rupee. Highly-placed sources said the PM has been personally monitoring the current economic scenario and is learnt to have had several rounds of meetings with his cabinet colleagues.
    rajat.guha@timesgroup.com