In order to improve the ease of doing business in India and to increase foreign investment inflows into the country, the Indian government has simplified foreign direct investment (FDI) rules by introducing a concept of composite cap for all kinds of overseas inflows. According to Finance Minister Arun Jaitley, the move will effectively give equal treatment to global capital entering Asia’s third largest economy.
The Cabinet Committee of Economic Affairs (CCEA), chaired by Prime Minister Narendra Modi, decided to do away with separate caps for foreign direct investments, foreign portfolio investments (FPI) and investments by non-resident Indians (NRIs) by introducing a composite cap for all kinds of overseas inflows. A government official also clarified that foreign institutional investment (FII) limits in the banking and defence sector have been retained at existing levels to prevent disruptions in sensitive sectors.
It is one of the biggest moves flagged by Jaitley in his budget in February which will provide companies with greater flexibility in choosing how they plan to raise capital.
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