India relaxes FDI rules in telecoms, 12 other sectors

As a result of the move - which was cleared yesterday by Prime Minister Manmohan Singh in a meeting of senior cabinet ministers - foreign investors will be allowed take a 100% stake in telecom firms, up from the current 74% - this will allow companies such as Vodafone, Telenor and Sistema to operate in the country without requiring an Indian partner.

Telecom shares have benefited from the news with Temasek-backed Bharti Airtel seeing a rise of 1.4% to INR325.75 while Idea Cellular gained 2.9% to INR161.95.

The new rules also allow foreign investo to take a 100% in courier services as well. Reliance Equity Advisors recently sold its interest in DTDC to French express logistics firm GeoPost, which now has a 42% share, while Temasek has a 27.74% stake in First Flight Couriers, bought in 2007.

In single brand retail, foreign investments seeking ot control more than 49% of a company will require approval from the Foreign Investment Promotion Board (FIPB).

The government will raise the FDI cap for the insurance sector from 26% to 49%, but the proposal will need to be approved by parliament.The cap on FDI in asset reconstruction companies has been raised from 74 % to 100%. No decision was taken on FDI cap in multi-brand retail, airports and media.

The government has been reviewing caps on foreign investment to lure funds into a struggling economy and finance a current-account deficit that helped push the rupee to a record low of INR61.21 per US dollar this month.

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• Topics
• South Asia
• Regulation
• regulation
• India
• FDI