The cabinet committee on economic affairs on Thursday cleared a policy for determining composite foreign investment limits by including funds flowing through foreign direct investment (FDI), foreign institutional investment (FII) and other routes.
The committee approved “the introduction of composite caps for the simplification of foreign direct investment”, Finance Minister Arun Jaitley told reporters after the cabinet meeting in New Delhi.
The decision of merging the limits of foreign direct and portfolio investments into a composite cap is essentially a move towards giving companies more flexibility for deciding on the desired mix of foreign investment.
It will also bring in transparency and clarity on the country’s foreign investment policy.
Opposition parties, including the Congress and the Left, have been against the proposal on the ground that portfolio investment is in nature very short-term “hot money” that can leave the country at any time, creating crises of capital outflow.
In this connection, the government said on Tuesday that FDI in the country has seen a 48 percent growth since the launch of the ‘Make in India’ initiative in September last year.
“The FDI growth has been significant after the launch of ‘Make in India’ initiative in September 2014, with 48 percent increase in FDI equity inflows during October 2014 to April 2015 over the corresponding period last year,” a commerce ministry statement said.
In 2014-15, the country witnessed unprecedented growth of 717 percent or $40.92 billion in investments by foreign institutional investors (FIIs), it said.