Industry bodies said the decisions will help attract much-needed capital, create jobs, encourage collaboration and benefit cash-starved small and medium enterprises.
"Decision on FDI in railways and defence will send signal of the Modi government's commitment to economic reforms. Speed and consensus on Insurance Bill will be a big differentiator though," Assocham Secretary General D S Rawat said.
Pushing ahead with the reforms agenda, the Narendra Modi-led government yesterday approved raising FDI limit in the defence sector to 49 per cent and opened up the railway infrastructure segment for foreign direct investment.
Commenting on FDI in Defence, CII Director General Chandrajit Banerjee said: "This would definitely encourage MNCs to get into co-development and co-production arrangements with Indian companies.
With this move, the Government has made its intentions clear to the world that we mean business and job creations in India".
"We expect that SMEs who are struggling to sustain their businesses due to the lack of capital and cash flows, would benefit in particular," he added.
PHD Chamber President Sharad Jaipuria said higher FDI in defence is encouraging and will go a long way to infuse innovation and to generate employment opportunities in the defense products manufacturing processes.
The FDI ceiling in the sensitive defence sector has been hiked to 49 per cent from current 26 per cent, with the condition that control in joint ventures for manufacturing of defence equipment will remain in Indian hands.
The move is aimed at boosting the domestic industry, which imports up to 70 per cent of its military hardware.
Welcoming the move to allow 100 per cent FDI in railway infrastructure, Federation of Indian Chambers of Commerce and Industry President Sidharth Birla said: "This overdue measure has happened at a time when the existing rail network and Indian Railways need funds to modernize and expand capacity to serve fast-growing needs of the economy".
Echoing similar sentiments, Banerjee said the decision ‘would help railways to mop up much-needed resources to modernise and upgrade its carrying capacity.
‘It would attract newer technology, upgrade the facilities, improve throughput and help with the Ministry's vision of achieving a freight share of over 50 per cent by the Indian Railways’.
The Cabinet approved allowing 100 per cent FDI in areas such as high-speed train systems, suburban corridors and dedicated freight line projects implemented in PPP mode.
Finance Minister Arun Jaitley in his Budget speech for 2014-15 had announced plans to increase FDI in the defence sector and open up the cash-starved government-owned railways.
The Cabinet gave approval to the announcements made in the Budget.
Image: Prime Minister Narendra Modi; Photograph: Rajesh Karkera/Rediff.com
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