India to Unveil Single FDI Policy for Financial, Banking Sectors

India will unveil a single policy for foreign direct investment, including in sectors such as financial services, insurance and banking by March 31, Commerce and Industry Minister Anand Sharma has disclosed. After 3 days of discussions with senior administration officials, Sharma acknowledged that “it’s true that we were slow off the block when we started the process of economic reforms and liberalization,” but asserted in the past few years, “it would be appreciated that India has moved much faster.”
“India works on a very small negative list and the FDI which comes into India - the majority of the sectors - are in the automatic route,” he said. Sharma argued that for all of the criticism and whining, “When you look at the pace at which some of these sectors - financial services, insurance and banking - have been opened, then India has done far better than many of the countries, including in Europe and here, in these sectors.” He pointed out that “you have more US bank branches in India. You have more British bank branches in India, or for what matter, of the other countries, and there are partnerships of the major insurance companies with the premier insurance companies in India.”
“So, it is, I’d say, an incremental movement. Whatever decisions India has taken have been after careful consideration and evolutionary by building a consensus and these policy decisions are enduring ones.” Sharma said however that come March 31, there would be a crystallization of certain steps his ministry had initiated to open out to more flows of FDI with more relaxed limits that would be attractive to investors. “Our last FDI policy on the upper limit of FDI in these sectors, which are not in the automatic mode, where the Foreign Investment Promotion Board approval was required since 1996 was Rs 600 crore (Rs 6 billion). Now, we have through a cabinet decision on the initiative of my ministry, doubled the cap from Rs 600 crore to Rs 1,200 crore (Rs 12 billion), and what is even more significant was that earlier, Rs 600 crore used to be the cost of the project, but now it is not the cost of the project but net FDI inflows.”
Sharma also said that “we will also in the next few days come out with a single FDI policy document,” and pointed out that “when we started the opening up of the Indian economy and inviting FDI, all policy decisions were communicated through what we call the press notes and every year had its series of press notes.” “We had 177 press notes detailing the FDI policy. It was clear that we needed greater clarity, predictability and a policy document, which is easy to comprehend. We had started this process - a draft was put out in the last week of December 2009 for stakeholders consultations inviting responses, for inputs from industry, globally from investors throughout the world and by the stakeholders in India, the chambers of commerce and industry.”
Sharma said that this consultative process was now completed and on March 31, “we will come out with a single FDI policy document, which has subsumed all 177 press notes.” He said that in order to make this operational, “We have also set up - with government and industry in partnership - through a cabinet decision, an entity, a non-profit company called Invest India and FICCI is the partner with the Indian government and we also intend to give some equity at the appropriate time to all the states of the Indian union to bring them on board.” Sharma said that “we are in the process of rationalizing and bringing a greater degree of uniformity when it comes to various mandated approvals for investors.”

Gulf NRIs send more money home

22 Mar 2010, 0400 hrs IST, Gayatri Nayak, ET Bureau

MUMBAI: The Indian Diaspora from the Gulf region is remitting more money home than their counterparts in the rest of the world. The region has increased its share of inward remittances even as the region is slowly witnessing a slow reverse migration. With global oil prices set to harden further, inflows from the region is expected to go up further. 

A study on invisibles by RBI in the balance of payments comprising income from transaction in services and overseas investments, besides permanent transfers such as remittances by the Diaspora, has said the Gulf has accounted for 27% of the total remittances. 

The central bank has quoted a survey on remittances by overseas Indians which it conducted in November 2009 (The other findings of the survey are, however, not in public domain). The last time, when RBI had done a similar survey published in November 2006, the Gulf region had accounted for 24% of the remittances inflows, while North America and Europe accounted for 44% and 13%, respectively. While the share of North America has now dipped to 38%, that of Europe has risen to 18%. 

India is the largest recipient of remittances by its Diaspora. The World Bank has estimated that it has received close to $47 billion as remittances in 2009. These include money sent by relatives abroad for the maintenance of their families back home as well as money parked in various NRI deposits that is used locally and not repatriated or used for local investments. The sharp increase in remittances started with the oil boom in the Gulf, resulting in the surge in migrant labour to the region and later in the 90s the technology boom resulted in an immigration surge of skilled IT professionals in North America and Europe. 

Bankers attribute the current rise in remittances from the Gulf to a slew of initiatives to tap the low-end market in the Gulf region. Many state-owned and new private banks have either set up branches or representative offices eyeing the potential in this segment and have devised many customer-friendly products an also tied up with exchange houses in the region. Besides, money transfer companies such as Times of Money and Western Union also have successively reached the Diaspora in the region. These initiatives have helped the flow of funds through official channels from the unofficial ‘hawala’ route earlier. 

The State Bank of India, which is estimated to have a share of 24% in the market is working towards increasing this share to 50% globally over the next few years. Among other things, it has envisaged geography-specific and clientele-specific products. For the Gulf region, it is targeting the low-end remittances market, which among other things includes tie-ups with exchange houses and also offering door-to-door services, said a senior SBI official requesting anonymity. 

According to the RBI study, the recent increase in global oil prices is likely to support remittances from Indian workers in the Gulf region. 

The declining share of North America is largely attributed to the slowdown in the region, resulting in job losses and hence, lower funds at their disposal to send back home, pointed an economist with a public sector bank.

India to Unveil Single FDI Policy for Financial, Banking Sectors

India will unveil a single policy for foreign direct investment, including in sectors such as financial services, insurance and banking by March 31, Commerce and Industry Minister Anand Sharma has disclosed. After 3 days of discussions with senior administration officials, Sharma acknowledged that “it’s true that we were slow off the block when we started the process of economic reforms and liberalization,” but asserted in the past few years, “it would be appreciated that India has moved much faster.”

“India works on a very small negative list and the FDI which comes into India - the majority of the sectors - are in the automatic route,” he said. Sharma argued that for all of the criticism and whining, “When you look at the pace at which some of these sectors - financial services, insurance and banking - have been opened, then India has done far better than many of the countries, including in Europe and here, in these sectors.” He pointed out that “you have more US bank branches in India. You have more British bank branches in India, or for what matter, of the other countries, and there are partnerships of the major insurance companies with the premier insurance companies in India.”

“So, it is, I’d say, an incremental movement. Whatever decisions India has taken have been after careful consideration and evolutionary by building a consensus and these policy decisions are enduring ones.” Sharma said however that come March 31, there would be a crystallization of certain steps his ministry had initiated to open out to more flows of FDI with more relaxed limits that would be attractive to investors. “Our last FDI policy on the upper limit of FDI in these sectors, which are not in the automatic mode, where the Foreign Investment Promotion Board approval was required since 1996 was Rs 600 crore (Rs 6 billion). Now, we have through a cabinet decision on the initiative of my ministry, doubled the cap from Rs 600 crore to Rs 1,200 crore (Rs 12 billion), and what is even more significant was that earlier, Rs 600 crore used to be the cost of the project, but now it is not the cost of the project but net FDI inflows.”

Sharma also said that “we will also in the next few days come out with a single FDI policy document,” and pointed out that “when we started the opening up of the Indian economy and inviting FDI, all policy decisions were communicated through what we call the press notes and every year had its series of press notes.” “We had 177 press notes detailing the FDI policy. It was clear that we needed greater clarity, predictability and a policy document, which is easy to comprehend. We had started this process - a draft was put out in the last week of December 2009 for stakeholders consultations inviting responses, for inputs from industry, globally from investors throughout the world and by the stakeholders in India, the chambers of commerce and industry.”

Sharma said that this consultative process was now completed and on March 31, “we will come out with a single FDI policy document, which has subsumed all 177 press notes.” He said that in order to make this operational, “We have also set up - with government and industry in partnership - through a cabinet decision, an entity, a non-profit company called Invest India and FICCI is the partner with the Indian government and we also intend to give some equity at the appropriate time to all the states of the Indian union to bring them on board.” Sharma said that “we are in the process of rationalizing and bringing a greater degree of uniformity when it comes to various mandated approvals for investors.”

New FICCI chief eyes $75 bn FDI by 2015

Hindustan Times

New Delhi,

Lower transaction costs in business through simpler regulations, elimination of inspector raj, and a further liberalisation of the insurance and retail sectors are high on the agenda of Rajan Bharti Mittal, the new president of industry chamber FICCI.

“FICCI will like to propose a target of $75 billion (Rs 3,45,000 crore) foreign direct investment by the year 2015 from the current level of $33 billion (Rs 1,51,800 crore). At the same time we have to increase the domestic investments,” said Mittal.

“While attaining a higher level of savings to support such growth is not a problem in today’s context, it is the economy’s absorption capacity which matters. FICCI studies on the state level reforms have identified hurdles in the way of increasing the absorption at the ground,” said Mittal.

“While the policy level reforms at the central government level have progressed, it is the procedural reforms at the state level that now deserve our attention,” he added.