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Foreign Direct Investment in India

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7/16/2015

Foreign Direct Investment - FDI

DEFINITION of 'Foreign Direct Investment - FDI'

An investment made by a company or entity based in one country, into a company or entity based in another country. Foreign direct investments differ substantially from indirect investments such as portfolio flows, wherein overseas institutions invest in equities listed on a nation's stock exchange. Entities making direct investments typically have a significant degree of influence and control over the company into which the investment is made. Open economies with skilled workforces and good growth prospects tend to attract larger amounts of foreign direct investment than closed, highly regulated economies.

Foreign Direct Investment - FDI

The investing company may make its overseas investment in a number of ways - either by setting up a subsidiary or associate company in the foreign country, by acquiring shares of an overseas company, or through a merger or joint venture.

The accepted threshold for a foreign direct investment relationship, as defined by the OECD, is 10%. That is, the foreign investor must own at least 10% or more of the voting stock or ordinary shares of the investee company.

An example of foreign direct investment would be an American company taking a majority stake in a company in China. Another example would be a Canadian company setting up a joint venture to develop a mineral deposit in Chile.

Foreign Direct Investment in India

The fast and steadily growing economy of India in majority of its sectors, has made India one of the most famous and popular destinations in the whole world, for Foreign Direct Investment. India's ever-expanding markets, liberalization of trade policies, development in technology and telecommunication, and loosening of diverse foreign investment restrictions, have further collectively made India, the apple of investors' eye, for most productive, profitable, and secure foreign investment. According to a recent survey by the United Nations Conference on Trade and Development (UNCTAD), India has conspicuously emerged out as the second most popular and preferable destination in the entire world, after China, for highly profitable foreign direct investment.

In recent years, bulk of the foreign direct investment in indian business sectors of infrastructure, telecommunication, information technology, computer hardware and software, and hospitality services, have been made by investors of countries like US, UK, Mauritius, Singapore, and many others.

FDI Law Practice India

The foreign direct investment in indian business sectors, can easily be made in a variety of ways, through the Governmental and Automatic Routes. However, the Joint Ventures are the most popular and preferred forms of making investment in Indian industry. At present, the most lucrative business sectors for FDI in India are, Infrastructure (Power, Steel, Railways, etc.); Telecommunications; Hospitality sector; Education; Retail; Real Estate; Retail sector, Petroleum and Petroleum Products; Biotechnology; Alternative Energy, etc.

1.FDI in Insurance Sector in India

After increasing the FDI cap in the Multi-brand Retail sector, Aviation sector, Power Trading, and Broadcasting sector, the Indian Cabinet Committee on Economic Affairs (CCEA) is strongly expected to raise the FDI ceiling in the Insurance and Pension sectors and the Pharmaceutical sector of India. A robust proposal for raising FDI threshold to 49% in the Insurance sector from the existing limit of 26%, has been submitted to the cabinet for proper approval in the quickest possible period. Such an increment in the FDI ceiling in the insurance sector of India, will certainly be highly and greatly appreciated by domestic and foreign insurance companies, for the purpose of expanding and enriching their insurance and re-insurance businesses under diverse insurance categories. Here, it may be noted that, the existing limit of foreign direct investment in the insurance sector of India, which is just 26%, is permitted to be made through the Automatic Route with proper license from the Insurance Regulatory and Development Authority (IRDA) of India. It means that a foreign investor cannot acquire more that 26% stake in the private insurance companies anywhere in India.

Described explicitly in the Seventh Schedule of the Constitution of India, Insurance is one of the significant economic sectors of the country, which at present has extensive scope for expansion and development, to be at par with the insurance sectors in developed countries of the world. Progressing fast with an average yearly growth rate of over 30%, the current worth of Indian insurance industry is about $41 billion. Based on these statistical facts, the insurance industry of India has been ranked as the fifth largest and booming insurance market in the whole world. At present, merely two million Indians are covered under any insurance schemes like Mediclaim, which is just 0.2% of the total Indian population of one billion. In developed countries like USA, this percentage is about 75%. Hence, there is vast scope for development and refinement in the insurance sector of India in future times. But, at present, only about 50 life insurance and general insurance companies are active in the insurance sector of India. For such purposes, the Insurance Regulatory and Development Authority (IRDA) of India requires a capital infusion amounting to over US $12 billion in the next five years, by domestic and foreign insurance companies.

2.FDI in Single Brand Retail Sector India

Till 2011, foreign direct investment in the single-brand retail sector of India, was limited to 51%. Now, as per the recent development and declaration of the Government of India (made in

September 2012), this limit is finally extended up to 100% ownership by foreign retailers and investors. Thus, great and elusive opportunity for entering into vast and abundant retail sector of India, is now generously offered to all foreign companies, retailers, and investors of the world over. To globally prominent and popular single-brand retailers like IKEA, Apple, Nike, and several others, this declaration of Indian Government is certainly a magnificent boon. Exclusive and refined information about the retail sector of India is being provided below, as service to our Indian and global visitors.

The retail market of India is one of the largest and most progressive retail markets in the whole world, with a high growth rate equaling to 15% every year. Currently, the retail industry of India (including both single-brand and multi-brand) is worth US $450 billion, and contribute about 15% to the national GDP of India every year. Almost all sectors of Indian economy have been developing and progressing fast constantly since a decade, to expand and enrich the retail industry also, besides all other sectors. The national GDP growth rate of 8% has been boosting the financial status of the majority of Indian population, to enhance their purchasing power. Moreover, the organized retail sector of India is inadequately developed, and thus, has ample potential for tremendous growth, as in many well-developed nations of the world.

After the recent FDI liberalization policies in the retail sector of India, the organized retail sector of India is expected to grow with a rate of over 10% every year. The foreign direct investment in the single-brand and multi-brand retail sectors, is hoped to reach the level of US $ 2.5-3 billion, in the next five years. However, the foreign single-brand retailers will have to procure at least 30% of their products and goods from the local or domestic industries and companies, to do business in India. Here, it may be noted that in the multi-brand retail sector, the permitted level of FDI is up to 51% only, according to the latest governmental declaration.

3.FDI in Multi Brand Retail Sector India

The recently declared policy of the Government of India regarding foreign direct investment in the Multi- brand Retail sector of India, is like a welcome and great boon to all foreign retailers and investors. The Government of India has now finally decided to allow FDI up to 51% in the Multi-brand Retail sector of India. For a long time, the vast $450 billion retail market of India has been striking and alluring to foreign investors and retailers of the world over, for making highly profitable and secure foreign direct investment. Now, they are fully enabled and well-facilitated to perform such lucrative investments in huge and constantly growing retail sector of India. Some of the most outstanding features of the retail sector of India are described below, as service to all foreign retailers, companies, and investors of diverse sectors of commerce and industry.

Today, the retail industry of India is estimated to be worth US $ 450 billion, and by dint of this economic value, it is regarded as one of the top five largest retail markets in the whole world. The constantly growing economy of India with an average rate of 8% and India's 1.2 billion people, together make the retail industry of India highly growth-oriented and immensely profitable in present and future times. As per an estimate by mellow and expert economists, the retail market of India can reach the level of around $ 650 billion by the year 2015. The latest

decision of Indian Government is to boost the growth in retail, further more. According to percipient and discerning economists, the organized retail sector of India has potential to grow at the rate of over 15% every year, especially after this visionary decision of Indian Government.

Currently contributing to about 15% of the national GDP of India, the Indian retail sector is expected to entice huge FDI ranging from $2.5 - 3 billion in the next five year, after this liberalizing and visionary decision of Indian Government. Foreign investors, retailers, and companies of the world over, including the Wal-Mart of USA, Metro of Germany, Carrefour of France, Tesco of UK, etc., are now fully free and well-facilitated to make their majority stake investments in the multi-brand retail sector of India, for bright and promising future. The significant recommendations of the latest FDI liberalization policies of India, in multi-brand retail sector, are the following:

The minimum level of FDI in multi-brand retail sector will be worth $ 100 million Supermarkets are allowed in only those cities of India whose population is at least one

million At least 50% of the total investment will be made on the Back-end Infrastructure And, at least 30% of their goods and products will be procured from the local companies

and industries.

4.Foreign Direct Investment in Retail

The Retail Industry is the sector of economy which is consisted of individuals, stores, commercial complexes, agencies, companies, and organizations, etc., involved in the business of selling or merchandizing diverse finished products or goods to the end-user consumers directly and indirectly. Goods and products of the retail industry or sector, are the finished final objects/products of all sectors of commerce and economy of a country.

The Retail sector of India is vast, and has huge potential for growth and development, as the majority of its constituents are un-organized. The retail sector of India handles about $250 billion every year, and is expected by veteran economists to reach to $660 billion by the year 2015. The business in the organized retail sector of India, is to grow most and faster at the rate of 15-20% every year, and can reach the level of $100 billion by the year 2015. Here, it is noteworthy that the retail sector of India contributes about 15% to the national GDP, and employs a massive workforce of it, after the agriculture sector. India's growing economy with a rate of approximately 8% per year, makes its retail sector highly fertile and profitable to the foreign investors of all sectors of commerce and economy, of all over the world.

FDI in Retail India

AT Kearney (a globally famous international management consultancy) recognized India as the second most alluring and thriving retail destination of the world, among other thirty growing and emerging markets. At present, other profitable retail destinations of the world are China and

Dubai of Asia. Diverse foreign direct investment in indian retail is greatly cherished by most of the major and leading retailers of USA and European countries, including Walmart (USA), Tesco (UK), Metro (Germany), and Carrefour (France). Liberalization of trade policy and loosening of barriers and restrictions to the foreign investment in the retail sector of India, have collectively made the fdi in retail sector quite easy and smooth. Our services are easily and economically available for the following ways of fdi in indian retail.

The fdi in india's retail business can be made through any of the following routes:

Joint Ventures Franchising Sourcing of Supplies from small-scale sector Cash and Carry Operations Non-Store Formats

5.Foreign Direct investment in Real Estate

Fast and steadily growing economy of India, has a huge real estate industry amounting to about US$ 12 billion. Meticulous studies reveal that this real estate industry of India has been constantly growing at a high rate of 30% for last several years. After the Agriculture sector, the Real Estate sector of India, is the second biggest employer in the country, and possesses immense potential for foreign direct investment for diverse purposes, especially after the liberalization of FDI norms recently by the Government of India in 2005. So far, it is found that majority of the real estate developments have been made in the fields of residential housing facilities, and the remaining in the IT/ITES offices, business enterprises, hotels, hospitals, shopping malls, and industrial establishments. Today, abundant opportunities are available for foreign direct investment in real estate business of India, in these and other fields.

Today, along with NRIs and PIOs, foreigners are also facilitated to invest in the real estate sector of India in residential housing and townships, commercial premises, infrastructural facilities (at regional and local levels), technological parks, hotels & resorts, hospitals, educational institutions, industries, special economic zones (SEZs), retail, leisure and recreational amenities, etc, under the confinement of certain conditions. For wholly-owned subsidiaries a minimum capitalization of $10 million is made compulsory, and for joint ventures, it is $5 million. Again, a minimum of 25 acres of land coverage is desirable for FDI projects in real estate.

FDI in Real Estate sector in India

Companies, industries, and multi-mational corporations of the Information Technology and Outsourcing sectors are major and leading investors in the real estate of India, at present. According to an estimate, over 65 million square feet of IT space are to be developed in the next five years. Other popular means of fdi in indian real estate are residential and commercial complexes, amenities of the hospitality sector, industries, healthcare facilities, leisure organizations, and infrastructure. Easy and cheap availability of talented and skilled work force, lower casts of logistics, constantly expanding Indian market, steady growth of Indian economy,

etc. have been attracting and enticing factors for diverse foreign direct investment in real estate business in all across India.

6.Foreign Direct Investment in Aviation

Ever-growing national and international tourism for diverse purposes has widened and enriched the aviation sector of most of the major and fast-growing economies of the world. The aviation sector of India is outstanding among these. Therefore, foreign direct investment in aviation sector of these countries is highly profitable and secure. The fdi in indian aviation, is especially lucrative, because of the following reasons.

India's Aviation sector and its domestic aviation market both have been growing fast at high rates in the recent years. India is currently the ninth largest aviation market in the whole world, according to a RNCOS Report, and is very hopefully expected to emerge among the top five biggest aviation markets of the world by the year 2020. The magnitude of passenger traffic, both domestic and international, handled by the aviation sector of India, is about 100 million every year, and is growing fast further at striking growth rates more than 15%. The growth of its domestic market, too, is among the highest in the world (according to a recent report published in June 2011 by the International Air Transport Association, IATA), and has the potential to become the third largest domestic aviation market (with over 450 million mark of domestic passengers) by the year 2020, after that of USA and China.

To support and promote growth and prosperity in the Aviation sector of India, the Department of Industrial Policy and Promotion (DIPP) and the Government of India, are now planning to increase the FDI cap for foreign investors in the domestic airlines, from 24% to 26%. The foreign direct investment in aviation up to 49% is permissible in India, but foreign airlines were not permitted to invest in any domestic airline company. This increment legislation proposed by DIPP would allow the foreign investors to have voting rights in the board of an Indian carrier. Thus, in near future, the fdi in indian aviation is to be increased rapidly.

FDI in Aviation Sector in India

After the liberalization on foreign investment rules in the aviation sector of India, the number of national and international players and investors, and number of aircrafts (passenger, cargo, charter, etc), both are to be increased further, in forthcoming years. Today, there are about 15 scheduled operators operating nearly 500 aircrafts which connect the nation and the world.

7.FDI in Airlines India

The latest visionary decision of the Government of India to allow FDI up to 49% in India's domestic aviation, is expected to heal the cash-strapped aviation industry of India, and attract massive foreign direct investment in the aviation sector of India, in short and long future. Consequently, the huge aviation sector of India will flourish luxuriantly in near future, to become one of the largest and most glamorous aviation industries in the whole world. Rich, refined, and

exclusive information regarding the Indian aviation sector, is being offered in the section below, as service to our Indian and foreign visitors.

According to a recent RNCOS Report, India is one among the top ten largest markets of the world, in respect of aviation, and is growing tremendously with a high growth rate of 15% every year, to become one of the top five aviation markets in the whole world by 2020. The aviation sector of India has been serving about 100 million aviation travelers every year, both international and domestic, in the recent years. India's domestic aviation market has also been growing rapidly with growth rates of over 15% every year since past few years. According to a report published by International Air Transport Association (IATA) in June 2011, the domestic aviation market of India will emerge out as the third biggest domestic aviation market in the entire world by 2020 with over 450 million domestic passengers, after the domestic markets of USA and China.

The latest FDI policies of the Government of India in the aviation sector, are therefore, to entice remarkable and huge foreign direct investment in the Indian aviation industry, by foreign aviation companies, carriers, and investors, in near and far future. It is evident from the above elucidation that, the aviation sector of India, is considered as one of the most secure and profitable destinations in the entire world, for FDI in aviation. India's vast and ever-growing economy is to enhance the number of air travelers at domestic and international levels, which in turn, will promote further growth and prosperity in the aviation sector of India.

8.FDI in Power Trading

One of the significant and visionary decisions taken recently by the Indian Cabinet Committee on Economic Affairs (CCEA) regarding foreign direct investment, is to permit FDI up to 49% in the power exchanges or power trading in India. This decision of CCEA has been highly appreciated by the power exchanges of India, foreign investors of the world over, and the whole power sector of the country. Here, it may be mentioned that, FDI in the power sector of India has been permitted up to 100% (except the Atomic energy), but, there was no concrete and clear provision for FDI in the power trading in India. It is hoped that this decision of the Government of India will boost perfect and easy power exchanges, augment the availability of power, improve energy distribution, and introduce most efficient and best practices in power trading.

Power Trading involves purchasing and selling of electricity, with the help and guidance of the Power Exchanges. The power exchanges serve as a well-organized, unbiased, and open platform to the generators, suppliers, traders, shareholders, and consumers in the power sector of a country. At present, there are two main power exchanges functioning full-fledged in India, the Indian Energy Exchange (IEX) and the Power Exchange India (PXI). Collectively, these two major power exchanges handle just 2% of the total 800 billion units of power generated in the whole country. Hence, there was desperate need for fdi in the power trading in India, to make this power sector of the country better and most efficient.

This permission to FDI up to 49% in the power trading exchanges, comes under the categories of 26% Direct FDI, and 23% Institutional Investment by any Foreign Institutional Investor (FII).

These investments will be made in proper and strict compliance with the rules and regulations of SEBI, and the Central Electricity Regulatory Commission (CERC). The FII will be made under the Automatic Route, and the Direct Investment will be performed under the Governmental Route.

9.FDI in Broadcasting SectorIn order to liberalize the Broadcasting sector of India to foreign direct investment, the Indian Cabinet Committee on Economic Affairs (CCEA) raised the FDI cap from 49% to 74% in many fields of the Broadcasting sector in September 2012. However, CCEA opted to retain the existing cap of 26% in the fields of TV News Channels and the FM Radio. The recent governmental decision will be applied to the following Broadcast Carriage Service Providers (BCSPs):

Teleports (Up-linking HUBs/Teleports) Direct-to Home (DTH) Head-end in the Sky (HITS) Cable Networks (Multi-Service Operators who undertake up-gradation of networks for

digitalization and addressability) Mobile TVs

In these all cases, up to 49% of FDI will be made under the Automatic Route, and after this limit further investment up to 74% will be performed under the Governmental Route (FIPB Approval). More information regarding foreign direct investment in these fields of the broadcasting sector, and ideas about ours swift and impeccable services for the same, are given in the lower section of this article separately.

FDI in DTH, FDI in Cable

Till now, foreign direct investment in the DTH and Cable TV was limited to 49% in India. And, in the field of Head-end in the Sky (HITS) it was up to 74%. Now on, after the recent decision of the Government of India, the maximum permission limit of FDI in these all fields of the broadcasting sector has been set to 74%. The Head-end in the Sky (HITS) is nothing but a satellite multiplex service which offers TV Channels for cable operations. In India at present, about 26 million households use DTH, and over 80 million houses are connected through the cable network. Thus, foreign companies and investors are given welcome and great opportunities for making direct investment in the ever-expanding and highly profitable broadcasting sector of India. But, in the fields of TV News Channels, Current Affairs, and the FM Radio, the upper limit of FDI is kept at the existing level of 26%, which is to be made strictly under the proper FIPB approval (approval of the Foreign Investment Promotion Board).

Today, FDI in India is commonly considered to be very lucrative and completely secure, and therefore, India has become one of the most popular and preferred investment destinations in the whole world. The most impressive features of India favoring FDI in India are the following --- it is a vast and varied market with over 1.25 billion population (comprising about 17.5% of the

world population); its steady economic growth with an average annual growth rate of about 8%; liberal and generous Governmental policies for attracting FDI in India; its well-developed marine trades; its large qualified and skilled workforce available economically; and its two globally prominent stock exchanges. Lastly, the most thriving and enticing economic sectors of India to foreign people and companies at present are information technology and ITES, education, leisure and hospitality, telecommunications, real estate, retail, infrastructure, power and energy, business outsourcing, insurance, mining and minerals, manufacturing, and various consumer goods and products.

10.Outbound Investments from India

Necessary development in most of the major and important sectors of commerce and economy, and liberal FDI policies of governments, in countries of all around the world, have opened the door to extensive investments (domestic as well as foreign direct investments) in diverse profitable and financially secure sectors. Besides India, other globally prominent and preferable foreign direct investment destinations are United States, UK, France, Germany, Hong Kong, Belgium, Spain, Canada, China, the Gulf Countries (especially including Bahrain), Brazil, Australia, Switzerland, Sweden, Denmark, Mauritius, Singapore, Vietnam, and several other countries of all across the globe.

Other Latin American and African countries also have been inviting substantial foreign direct investment in the last several years. There exists huge investment opportunities in Tanzania in the fields of mining, manufacturing, and agriculture. Bahrain and other Gulf Countries offer extensive business prospects in non-oil sectors, particularly in finance, insurance, manufacturing, and tourism.

It is here noteworthy that over US $ 25 billion has been being invested every year regularly by Indian investors of diverse sectors in these countries collectively. For the first six months of the year 2011-12, the amount of outward investments from India was US $ 19 billion, as per a report issued by the Reserve Bank of India (RBI).

The lower bureaucracy has vehemently objected to the government's decision for 100% Foreign Direct Investment (FDI) in Railways and 49% FDI in Defence and Insurance, as per minutes of a meeting held in February which are now available in public domain.

Latest Development

1.Intelligence agencies' clout to stall FDI may go

Security clearance parameters for foreign direct investment (FDI) proposals may no longer be left to the discretion of intelligence agencies. Security clearance parameters for foreign direct investment (FDI) proposals may no longer be left to the discretion of intelligence agencies with the Union home ministry planning to clearly

spell out the "core" areas of concern based on which agencies can immediately shoot down proposals or proceed with further inquiries.

According to sources in the Union home ministry, its top bureaucrats are working on guidelines for agencies like R&AW and Intelligence Bureau on how to go about investigating the antecedents of the proposed foreign investor. The guidelines, aimed at furthering Modi government's 'ease of doing business' agenda, are expected to be finalized by next month.

"The purpose of the guidelines is to clearly define the core areas of national concern...for instance, any foreign investor with links with terrorist or secessionist outfits, with a history of money laundering, or one that has been involved in a major criminal activity, should be red-flagged right at the outset and its proposal stamped with a clear-cut 'no'," a senior official working on the draft guidelines told TOI.

In cases where adverse inputs against the foreign investor are milder, the intelligence agencies will be required to probe further and, after being satisfied that it shall not pose any risk to national interest, convey its findings to the Union home ministry along with the final recommendation. Where nothing adverse is found pertaining to the specified core areas of concerns or areas of mild concern, a clear-cut yes may be conveyed without delay to the Union home ministry.

As per this approach, FDI proposals relating to pre-defined, core areas of national concern or those with no such concern may be conveyed an immediate "no" and "yes" respectively. As regards the proposals where the foreign investor evokes mild security concerns, the effort shall be to ensure that its security antecedents are checked without inordinate delay, enabling the home ministry to forward its recommendation along with any adverse findings, to the FIPB or concerned authority.

A senior home ministry official said the average time taken now for giving security nod to FDI projects is three to four months. "The idea is to streamline the procedures by laying down clear parameters for the agencies based on which a proposal can be accepted or rejected right away or a deeper investigation undertaken to firm up a view," the official said adding that pre-identified reference points will help to compress further the time taken for security clearances.

2.Government considering hiking FDI limit for media sector

The government is discussing a proposal for increasing FDI limit in the media sector from the current 26 per cent to attract foreign investments, sources said today. The government is discussing a proposal for increasing FDI limit in the media sector from the current 26 per cent to attract foreign investments, sources said today.

An inter-ministerial panel is discussing the issue, sources said, adding the government may look at hiking the cap to 49 per cent.

A proposal regarding this was recently discussed in the Information and Broadcasting Ministry.

FDI is allowed only up to 26 per cent in publishing of newspapers and periodicals dealing with news and current affairs through government approval route.

In June last year, then Union Information and Broadcasting Minister Prakash Javadekar had said that the ministry is seeking inputs from various stakeholders on whether to allow 100 per cent FDI in news media.

The government has already liberalised FDI norms in sectors like insurance and defence to attract investments.

3.Govt will consider repealing 51% FDI policy for retail

Govt will consider repealing the 51% FDI policy in multi-brand retail, while no proposal would be entertained for opening supermarkets in India by foreign players, Sitharaman said.Government will consider repealing the 51 per cent FDI policy in multi-brand retail, while no proposal would be entertained for opening supermarkets in India by foreign players, Union Minister Nirmala Sitharaman said today.

"I will go back to the Cabinet and say should we delete one document...I am not going to entertain any proposal in multi-brand retail," the Commerce and Industry Minister told Bloomberg TV India.

The statement comes amid a fresh controversy after the Department of Industrial Policy and Promotion ( DIPP) in its consolidated FDI policy retained the previous UPA government's decision to allow foreign retailers to open multi-brand stores with 51 per cent ownership.

She also said "we will ensure FDI in e-commerce doest not become a back door for FDI into multi-brand retail".

Finance Minister Arun Jaitley had recently said the BJP was "never" in favour of allowing foreign direct investment in multi-brand retail and a recent government notification only published the extant policy on it.

Only one investment proposal of the UK-based Tesco has been cleared since 51 per cent FDI was allowed in 2012.

The ruling BJP in its election manifesto had said: "Barring the multi-brand retail sector, FDI will be allowed in sectors wherever needed for job and asset creation, infrastructure and acquisition of niche technology and specialised expertise."

Government mulls 100% FDI in insurance broking

The complication that FDI limit is creating on regulation is that foreign banks allowed to distribute insurance as brokers end up breaching the caps.

The government is considering exempting insurance intermediaries, including brokers, from the foreign direct investment limit. Although caps on insurance intermediaries were not originally envisaged, the insurance regulator had at some point decided to apply the limits applicable to insurance firms to other companies across the sector.

The rethink comes at a time when the government has allowed reinsurance firms to set up 100 per cent-owned units in the form of domestic branches. Several of the international brokers are keen to follow their clients in India but are not interested in a minority-stake company.

The complication that the FDI limit is creating on regulation is that foreign banks allowed to distribute insurance as brokers or corporate agents end up breaching the caps.

Berkshire Hathaway had set up a wholly owned company for distribution of motor insurance some years back but subsequently the Insurance Regulatory and Development Authority of India (IRDAI) decided that even corporate agents should be subject to the FDI limits. Now, the thinking is to go back to the original stance of allowing 100 per cent ownership.

The other reason for considering 100 per cent FDI for broking firms is that insurance broking is not a capital-intensive business and most of the work is advisory in nature. Even if the premium is sourced by a multinational broking firm, the policy is issued by a domestic insurance company and there is no loss of foreign exchange.

At present, most of the top international broking firms are present in India. These include Aon, Marsh, Howden and JLT. Willis, which had exited from a joint venture earlier, is re-entering the market through an equity stake in Almondz.

FDI in equity jumped 48% after launch of 'Make in India': Commerce and industry ministry

FDI into equity jumped 48 per cent after the launch of the 'Make in India' programme, the commerce and industry ministry said on Tuesday. Foreign direct investment (FDI) into equity jumped 48 per cent after the launch of the 'Make in India' programme, the commerce and industry ministry said on Tuesday.

The 'Make in India' initiative, which seeks to make the country a global manufacturing hub, was launched on September 25 last year. Between October 2014 and April 2015, equity FDI rose 48 per cent, according to the ministry. Total FDI includes fresh equity inflows and reinvested earnings of foreign investors.

The ministry also said that in 2014-15, investment by foreign institutional investors (FIIs) rose

717 per cent to $40.92 billion. "These indicators showcases remarkable pace of approval being accorded by the government and confidence of investors in the resurgent India," the ministry said.

FDI inflows under the approval route grew 87 per cent to $2.22 billion in the last fiscal.

"The increased inflows of FDI in India, especially in a climate of contracting worldwide investments, indicate the faith that overseas investors have imposed in the country's economy and the reforms initiated by the government towards ease of doing business," the ministry added.

The 'Make in India' initiative and its outreach to all investors have made a positive investment climate for India, it said.