Finance Minister P Chidambaram today made a strong case for reviewing the Foreign Direct Investment (FDI) ceiling in various sectors saying they were fixed long ago.
“We (should) look at each FDI cap. If the cap is serving a purpose,we should continue with the cap,if the cap is no longer serving the purpose then we should either relax the cap or remove the cap”,he said,while addressing a press conference here.
The FDI caps were laid down historically at different points of time,he said,adding “we are now into 22nd year of liberalisation…These caps must be looked into again.”
Presently two committees — one under Department of Economic Affairs Secretary Arvind Mayaram and the other formed by RBI — are looking into different aspects of the foreign investment.
He said RBI was likely to come out with its paper on FDI in two weeks time.
“We will take it forward as soon as we have RBI paper and the committee’s report. I don’t think either the PM or I have any pre-conceived opinion on a particular cap”,he said.
Earlier this week,Prime Minister Manmohan Singh had said “the liberalisation of FDI in multi-brand retail,civil aviation and other areas,are important signals. We are reviewing the FDI policy comprehensively to see what more can be done in the coming months.”
At the same time,Commerce and Industry Minister Anand Sharma had said that further liberalisation of foreign investment norms could include raising FDI cap in sectors like insurance,banking and defence in a “calibrated and incremental” manner.
The eight-member Committee on foreign investment held its first meeting on April 4.
The panel has been set up to examine and work out the details of the application of the principle followed internationally for defining FDI and FII.
Currently,if an investor has a stake of 10 per cent or less in a company,it is treated as FII. If the stake exceeds 10 per cent,the investment is treated as FDI.