Telecom to have 100% FDI, defence production 26%

The move came as the country badly needs capital inflows and the rupee comes under pressure

The Prime Minister-chaired meeting today gave in-principle approval to remove a foreign direct investment cap in the telecom sector, while raising the limit to 49% in defence production from existing 26% with caveats.

The move came as the country badly needs capital inflows as the rupee comes under pressure and current account deficit stood a record 4.8% of GDP in 2012-13.

The telecom sector, which has a current FDI cap of 74%, will have to come via the Foreign Investment Promotion Board if it crosses 49%, sources said.

FDI in defence sector will need approval from the Cabinet Committee on Security over a threshold, according to a decisions taken by a meeting of senior Cabinet ministers with Prime Minister Manmohan Singh. .

The decisions will now go to the Cabinet.

The Arvind Mayaram Committee has recommended that nine ectors -- FM radio, up linking news and current affairs; print media (news and current affairs);commodity exchanges; stock exchanges along with depositories and clearing corporation; power exchanges; petroleum and natural gas refining and insurance, defence production and private security agencies-- be categorised as the ones where Indian ownership and control is essential.

Hence, it recommended 49% foreign investment cap in these sectors. The two of these sectors--insurance and petroleum, natural gas refining-- were recommended to have only foreign direct investment, while the others could include portfolio investments as well.

In its recommendations given to the Department of Industrial Policy and Promotion (DIPP), the panel said 51% foreign investment in these sectors will be under Indian ownership and control.