A long-pending proposal to treat investments by non-resident Indians (NRI) on a par with domestic ones is likely to be delayed. The government is learnt to make some more changes in the NRI investment proposal that will see the removal of sectoral caps for these investments and, hence, the requirement to seek a prior government nod. The proposal was floated by the Department of Industrial Policy and Promotion (DIPP) to tap NRIs for investments in sectors such as defence, railways, among others. According to DIPP officials, the government is planning to make some more changes to the proposal and will go for another round of inter-ministerial talks. Last year, the government had formed a committee on this matter. This was done to further push the Make in India campaign. The Cabinet is likely to take up two far-reaching proposals this week that will seek to simplify the foreign direct investment (FDI) regime further. One of them is related to the issue of composite caps, which will do away with the concept of multiple definitions of overseas investments, especially between foreign portfolio investments (FPI) and FDI. All foreign investments will now be treated as one consolidated foreign investment, clearing the ambiguity on various sectoral FDI limits. Besides, FDI and FPI, the composite cap will include NRI investment, depository receipts, foreign currency convertible bonds and fully and mandatorily convertible preference shares or debentures. This makes sense since all these investments are taken as foreign investment while assessing whether downstream investments by a company is foreign investment or not. Earlier, a panel headed by former finance secretary Arvind Mayaram had recommended replacing separate caps on FPI and FDI with a composite foreign investment cap that combines the two.
In fact, the foreign investment cap in the insurance sector included FPI, FDI, NRI even when the cap was at 26 per cent. The new cap of 49 per cent includes foreign venture capital funds and depository receipts. Additionally, the Cabinet will consider increasing the floor of foreign investment that require the Cabinet Committee on Economic Affairs (CCEA)'s nod. Currently, investments of at least Rs 1,200 crore go to CCEA. Now, the threshold is proposed to be increased to Rs 3,000 crore. According to officials, this will allow greater inflow of investments in the infrastructure sectors. Since coming to power last year, the Narendra Modi government has liberalised the FDI limit in sectors such as defence, insurance, real estate, railways and medical devices. These measures are also targeted at improving India's ranking in the World Bank's Ease of Doing Business index. India currently ranks at 142 among 189 countries.