Govt notifies composite cap for foreign investment

Sectors like insurance, pension, retail and pharmaceuticals will benefit from introduction of composite cap in the FDI policy which came into effect from today.
In all these sectors, foreign portfolio investors can invest up to 49 per cent under automatic route.
The government today notified changes in the foreign direct investment (FDI) policy under which there will be a composite cap on overseas investment in various sectors, except in banking and defence segments.
The other sectors which will be benefited from this concept include scientific journals, facsimile edition of foreign news papers, tea plantation and mining & mineral separation of titanium.

At present, 100 per cent foreign investment under government approval route is permitted in these sectors, except insurance and pension, where the cap is 49 per cent. However in case of FDI, a foreign investor is required to obtain government approval above 26 per cent, though there is no such restriction on portfolio investments.
The Press Note further said that portfolio investment up to 49 per cent, subject to the sectoral ceiling, will not need government approval, if they do not result in transfer of ownership or control from Indian citizens to non-Indian entities.

Under the modified norms, all types of direct and indirect overseas investments, whether portfolio or FDI, will be subject to a composite foreign investment cap for that particular sector.

"...There will not no sub-limits of portfolio investment and other kinds of foreign investments in commodity exchanges, credit information companies, infrastructure companies in securities market and power exchanges," the Press Note issued by the Department of Industrial Policy and Promotion said.
However, in private sector banking, it said, there will a sub-limit of 49 per cent on portfolio investment within the overall foreign investment limit of 74 per cent.