In a bid to streamline foreign investment, the Union Cabinet could introduce a composite foreign investment cap on Thursday. This will include FDI, FII and other instruments in various sectors, reports Sajeet Manghat of CNBC-TV18.
Nearly five months after the finance minister in his budget speech announced bringing composite caps for all sectors, the cabinet is likley to meet on Thursday to approve the proposal. Composite caps allow consolidation of all categories of foreign investments within the sectoral cap. The move is expected to align the foreign investment policy since many of the sectors already have composite caps.
As of today, 12- 13 sectors already have composite caps including sectors like private sector banking, airlines, insurance and defence.
Only a handful of sectors will benefit from composite caps, these include power and commodity exchanges, credit information companies, and market infrastructure companies which current have higher sectoral cap but lower cap for foreign portfolio investors.
But the biggest impact will be for sectors where Foreign Investment Promotion Board nod is required for investments beyond the automatic route.
Sectors like retail will see further scrutiny by the government everytime a change in foreign holding takes place. Currently government nod is required for f-d-i in single brand retail above 49 percent and for multi brand retail up to 51 percent. The move will require retail companies to seek FIPB nod to ensure f-p-i investments are allowed up to the sectoral caps.
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