Single policy for FDI in banking, insurance soon

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 Obama 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."