PM to chair Cabinet meeting on crucial FDI issues | delhi | Hindustan Times
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PM to chair Cabinet meeting on crucial FDI issues

delhi Updated: Jul 16, 2013 10:39 IST
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Prime Minister Manmohan Singh will discuss a proposal to increase the Foreign Direct Investment (FDI) cap in sectors like telecom, retail and defence with some of his senior Cabinet colleagues on Tuesday.

Concerns raised by the commerce and industry ministry on the increasing number of acquisitions of domestic pharmaceutical companies by foreign firms, is also expected to feature in the discussions.

According to media reports, the Department of Industrial Policy and Promotion (DIPP) has sought the intervention of the Prime Minister's Office (PMO) in the matter.

Commerce and industry minister Anand Sharma and finance minister P Chidambaram are expected to attend the meeting.

Last month, the finance ministry had proposed sweeping changes in the FDI regime, favouring higher sectoral caps in almost all sectors, including defence, multi-brand retail and telecom.

Virtually doing away with the 26% ceiling, a committee headed by economic affairs secretary Arvind Mayaram has recommended that FDI limit be raised to 49% in almost all sectors through the automatic route.

Tuesday's meeting is taking place after the recent visits to the United States by both Sharma and Chidambaram to woo foreign investments.

FDI inflows in 2012-13 were to the tune of 22.42 billion dollars, a decline from 36.50 billion dollars in 2011-12.

A committee headed by Mayaram has also proposed raising the cap to 49% under automatic route in sectors like single-brand retail, existing pharma companies, power and commodity exchanges, PSU banks, tea plantation, print media, PSU petroleum refinery, asset reconstruction companies, stock exchanges, insurance, depositories and clearing corporations and satellite services.

The government is keen on increasing FDI ceilings to attract more overseas investments and bridge the widening current account deficit. The deficit has been estimated at five per cent of the GDP in 2012-13 as against the Reserve Bank of India's (RBI's) comfort level of 2.5%.

A high deficit level puts pressure on the domestic currency and can expose the economy to balance of payments problem. It also impacts the country's foreign exchange reserves.