The government is considering a major overhaul of foreign direct investment (FDI) approval rules, with two proposals aimed at making it easier and faster for overseas investors to bring capital into India.
According to a report by Moneycontrol, one proposal seeks to raise the threshold for investments requiring clearance from the Cabinet Committee on Economic Affairs (CCEA) from the existing Rs 5,000 crore to Rs 15,000 crore.
The government is also examining changes to rules governing foreign investment in downstream companies.
A draft Cabinet note has reportedly been prepared, with preliminary consultations held among the Finance Ministry, the Department for Promotion of Industry and Internal Trade (DPIIT) and NITI Aayog. The proposals could be considered by the Cabinet soon.
FDI Approval Threshold May Be Tripled
Under the existing framework, foreign investment proposals exceeding Rs 5,000 crore are referred to the CCEA, while proposals below that threshold are generally considered by the relevant ministry. The Rs 5,000-crore limit has been in place since November 2015.
If approved, the threshold would increase threefold to Rs 15,000 crore. This would allow ministries to clear significantly larger FDI proposals without referring them to the CCEA, potentially reducing processing times and improving the ease of doing business.
The proposed change comes as the government continues efforts to attract foreign capital and support its broader economic growth agenda, including the goal of building a developed India by 2047.
Rules for Downstream Investment May Ease
The government is also considering changes to downstream or indirect foreign investment regulations.
Under the proposed framework, an Indian company receiving indirect foreign investment may not require a separate government approval if the relevant entity higher in the ownership chain has already secured the necessary clearance.
Currently, prior approval can be required for downstream investments in sectors under the government approval route, as well as investments involving entities from countries sharing a land border with India.
The proposed changes could eliminate repeated approvals where an investment has already been cleared earlier in the ownership structure, potentially making the process more efficient and encouraging additional foreign capital inflows.
