Budget may open window for big-ticket foreign investments

The Centre plans to create a special window for strategically important investors such as sovereign wealth funds and pension funds that wish to invest over Rs 3,000 crore through a single transaction.

Big-ticket foreign investors looking to invest in India could soon find their proposals getting quick treatment from the government.

According to sources, the Centre is planning to create a special window for strategically important investors such as sovereign wealth funds and pension funds that wish to invest over Rs 3,000 crore through a single transaction.

An announcement in this regard may happen in the Union Budget, scheduled to be presented on February 1.

Some strategically important foreign investors include Canada pension fund CDPQ, GIC (Singapore), the Qatar Investment Authority, Temasek (Singapore), and the Abu Dhabi Investment Authority.

Most of them met Prime Minister Narendra Modi virtually in early November. It is learnt that foreign investors showed faith in the government’s recent initiatives and reforms.

Through this window, foreign funds would receive a response from the government within three days, so that such a proposal can be fast-tracked. Also, the window will act as a point of contact between investors and the various ministries and departments concerned.   

This means any pending approval from the sectoral regulator or ministries can be taken up by foreign funds through this window. Sources said the department of economic affairs would track the status of such proposals every 14 days and help in resolving them if there were irritants.

At present, foreign direct investment (FDI) proposals take one-three months for approval, depending on the sector they fall in. With this, the time frame for government approval may be reduced significantly, said a senior government official privy to the development.

“The government has been working on various strategies for a more proactive approach to handhold investors, and help them in getting approvals, which is otherwise cumbersome for those from abroad,” the official said. “Apart from this, liberalising the FDI policy is being considered and an announcement will be made in due course,” he added.

Rajesh Gandhi, partner, Deloitte India, said: “A special window for approvals within a quick timeframe should give a boost to sovereign and pension funds and make it easy for them to invest in India. It is also suggested that the government could consider relaxing things like investment in renewable energy and secondary purchases, permitting funds to invest through holding companies, and bringing clarity whether such benefits will apply to investment by private equity and mutual funds.”

The move was prompted by the surge of 11.3 per cent in foreign capital inflows during the first seven months of the financial year, making India a preferred destination among global investors.

In FY21 (April-October), FDI inflows stood at a record high of $46.82 billion.

Sources say since 2019, India has attracted about $70 billion, which is almost double the amount received between 2014 and 2018.

In the meantime, the department for promotion of industry and internal trade is in the process of setting up a single window for investors, both foreign and domestic, seeking to set up businesses and manufacturing units in India. However, that window does not cover strategic investment.

Currently, there are two routes for FDI. One is the automatic route, where FDI is allowed without approval from the government.

The other is the government route, where approval from the government is required. The government from time to time amends the FDI policy.