Foreign investors are eagerly awaiting the passage of India's Insurance Laws (Amendment) Bill which raised FDI limits from 26% to 49%. The proposed hike in FDI limit is expected to result in an inflow of $5bn over the next five years. A select committee is examining various provisions of this Bill and is likely to submit its report on the last day of the first week of this Parliamentary session, which began on 24 November. If the Bill is defeated in the upper house, the government hopes to get it passed by convening a joint session of Parliament.
The first big-ticket FDI deal in the defence sector – also opened to foreign investments up to a 49% limit – is soon expected to be approved by the Defence Acquisitions Committee chaired by new defence minister Manohar Parrikar. This is the $2.1bn deal to supply 56 medium transport aircraft to the Indian Air Force by the Tata Group in association with Airbus. The Tata-Airbus bid is expected to get the nod even though it is the only one left after seven other contenders backed out.
The Indian government has also identified 38 specific railway projects needing FDI worth $14.5bn and has laid down transparent guidelines for potential investors. The biggest of these projects is the Mumbai-Ahmedabad high-speed corridor, which requires investment of $10.2bn and which has already aroused interest among Japanese investors. Indian railways have opened up for 100 per cent FDI in standalone passenger lines, hill railways, passenger terminals, construction of bridges and technological solutions for unmanned crossings.
To promote affordable housing projects and the building of smart cities, the government has allowed 100 per cent FDI in the construction sector. This move is expected to increase demand for cement, steel, fittings and fixtures, and create employment opportunities. According to guidelines, the minimum built-up area required for FDI has been scaled down from 50,000 to 20,000 square metres and the capital requirement has been brought down from $10m to $5m. The government is also considering abolishing the condition of locking in an investor for three years if the trunk infrastructure has been developed.
N Chandra Mohan is an economics and business commentator based in New Delhi.