New Delhi: In a bid to attract greater overseas capital into the country, Finance Minister Nirmala Sitharaman proposed in the Budget 2019-20, presented on Friday, to allow 100 per cent Foreign Direct Investment (FDI) into insurance intermediaries.
Besides, she proposed that local sourcing norms will be eased for FDI in 'Single Brand Retail' sector.
According to the minister, the government will examine suggestions of further opening up of FDI in aviation, media (animation, AVGC) and insurance sectors in consultation with all stakeholders.
India's FDI inflows in 2018-19 remained strong at $64.375 billion marking a 6 per cent growth over the previous year.
However, global FDI flows slid by 13 per cent in 2018, to $1.3 trillion from $1.5 trillion the previous year - the third consecutive annual decline, according to UNCTAD's World Investment Report 2019.
On its part, India Inc welcomed the FDI announcement with industry body Assocham President B.K. Goenka terming Sitharaman's maiden budget as a mega investment-oriented initiative.
"Currently, the FDI policy on 'Single Brand Retail Trade' provides for a 30 per cent local sourcing preferably from MSMEs, village and cottage industries, artisans and craftsmen where the FDI exceeds 51 per cent," said Paresh Parekh, Partner and National Tax Leader, Consumer Products and Retail, EY India.
"While there was a recent relaxation provided to offset the sourcing from India for global operations against the local sourcing, the same didn't have the expected impact to boost FDI in the sector. There was a lot of reluctance by the existing foreign JV players in the sector to increase FDI beyond 51 per cent to avoid coping with the sourcing norms and also reluctance shown by new foreign brands to enter the sector owing to the sourcing norms."
Accordingly, the budget proposal to relax the local sourcing conditions in the sector is expected have a "big positive impact for the existing players and also to the sector owing to the new FDI which should now enter the sector".
"It is clear that India needs investment dollars to drive growth," said Vivek Gupta, Partner and National Head - M&A, KPMG in India.
"The statement regarding easing FDI norms for aviation, media, single brand retail and insurance intermediaries is welcome and will spur investments - but the more interesting signals are on enabling further FPI participation in debt as well as the soundings around allowing more capital into REIT and INVIT platforms."