New Delhi:
Prime Minister Manmohan Singh will on Tuesday discuss the proposal to increase Foreign Direct Investment (FDI) cap in sectors like telecom, retail and defence with his senior Cabinet colleagues.
The meeting will also discuss the concerns raised by the Commerce and Industry Ministry on the increasing number of acquisitions of domestic pharmaceutical companies by foreign firms, an official said. The Department of Industrial Policy and Promotion (DIPP) has sought the intervention of the Prime Minister's Office (PMO) on this matter.
Commerce and Industry Minister Anand Sharma and Finance Minister P Chidambaram are expected to be present in the meeting.
Seeking to promote India as an investment destination, the Finance Ministry last month proposed sweeping changes in the FDI regime, favouring higher sectoral caps in almost all sectors including defence, multi-brand retail and telecom.
Virtually doing away with the 26 per cent ceiling, a committee headed by Economic Affairs Secretary Arvind Mayaram has recommended that FDI limit be raised to 49 per cent in almost all sectors through the automatic route.
The meeting comes days after Mr Sharma and Mr Chidambaram's visit to United States to woo foreign investments.
The FDI inflows in 2012-13 aggregated US $22.42 billion, a decline from US $36.50 billion a year before.
A committee headed by Economic Affairs Secretary Arvind Mayaram has also proposed raising the cap to 49 per cent under automatic route in sectors like single-brand retail, existing pharma companies, power and commodity exchanges, PSU banks, tea plantation, print media, PSU petroleum refinery, asset reconstruction companies, stock exchanges, insurance, depositories and clearing corporations and satellite services.
The government is keen on increasing FDI ceilings to attract more overseas investments and bridge the widening current account deficit. The deficit has been estimated at five per cent of the GDP in 2012-13 as against the RBI's comfort level of 2.5 per cent.
A high deficit level puts pressure on the domestic currency and can expose the economy to balance of payments problem. It also impacts the country's foreign exchange reserves.