Union Budget 2014-15: Steps to promote foreign direct investment in select sectors

The government has announced several steps to promote foreign direct investment (FDI) selectively in sectors where it helps the larger interest of the Indian economy. Announcing this during his maiden budget speech in the Lok Sabha today, finance minister Arun Jaitley said that composite cap of foreign exchange is being raised from the existing 26 per cent FDI to 49 per cent in defence manufacturing with full Indian management and control through the FIPB route.

The composite cap in the insurance sector is being increased upto 49 per cent from the current level of 26 per cent with full Indian management and control through the FIPB route. Announcing this, Jaitley said that the insurance sector is investment-starved and several sectors of the insurance sector need an expansion.

To encourage development of Smart Cities, requirement of the built up area and capital conditions for FDI is being reduced from 50,000 square metres to 20,000 square metres and from $10 million to $5 million respectively with a three year post completion lock in.

To further encourage this, projects which commit at least 30 per cent of the total project cost for low cost affordable housing will be exempted from minimum built up area and capitalization requirements, with the condition of three year lock-in.

In the manufacturing sector, the Finance Minister announced that the manufacturing units will be allowed to sell its products through retail including e-commerce platforms without any additional approval. FDI in the manufacturing sector is today on the automatic route.