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India Clears 100 Percent Foreign Direct Investment, or FDI, In Telecom Services; Relaxes FDI Rules Across Several Other Sectors By Amrutha Gayathri
on July 17 2013 3:27 AM
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A man speaks on a mobile phone in front of a billboard of Uninor at a market in the western Indian city of Ahmedabad February 6, 2012. REUTERS/Amit Dave India’s Prime Minister Manmohan Singh, on Tuesday, said the government would allow foreign companies to hold a 100 percent stake in companies in the telecom services sector, in a marked shift from the previous policy stance, as Singh's government works hard to restore India's standing as a strong emerging economy and his party's pro-reform image, less than a year ahead of general elections in the country. Recommendations

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The opening of the telecom sector to foreign players is expected to attract massive investment from abroad as the UK-based Vodafone Group Plc (NASDAQ:VOD) and Russian firm JSFC Sistema (OTCMKTS:JSFCF), among others, are expected to grab the opportunity, according to Mint, a local business daily. “The much-needed policy decision is a very positive development for the entire industry. With fresh foreign direct investments coming in, this would further catalyze growth and also the process of proliferation of telecom services across the country,” a spokesperson for JSFC Sistema’s Indian subsidiary, Sistema Shyam TeleServices Ltd, which provides telecom services under the MTS brand, was quoted as saying by Mint. The ruling Congress-led United Progressive Alliance, or the UPA, also announced the government's intention to relax caps on foreign direct investment, or FDI, in 11 other sectors including single-brand retail, oil and natural gas, and defense equipment, in a second wave of reforms after the government relaxed FDI rules for multi-brand retail and civil aviation 10 months ago. Related

* Manufacturers Are Desperately Seeking The Next China In India, ASEAN Markets * Supreme Court of India Directs RBI To Amend FEMA Rules For Implementing FDI In Retail The move comes at a time when the government is trying to increase dollar inflows to boost India’s plunging currency and to reverse the economic slowdown, which saw Asia's third-largest economy record its slowest growth in a decade, in March. Commerce and Industry Minister Anand Sharma said, according to Mint, that the decision to relax foreign investment restrictions was taken following a consensus among key ministers, and that the cabinet would discuss the matter next week. FDI in the telecom services sector was increased to 100 percent from 74 percent, but all foreign investments above 49 percent will need to be approved by the Foreign Investment Promotion Board, or FIPB. India, which has allowed 100 percent FDI in telecom equipment manufacturing since the early 1990s, suspended a preferential market-access policy on July 5, which mandates companies, mainly in the telecommunications sector, to source electronic goods from domestic manufacturers. In the defense equipment sector, FDI proposals in excess of 26 percent will need approval from the Cabinet Committee on Security on a case to case basis, although no limit is mentioned above 26 percent, if the proposal is to produce “state-of-the-art” equipment. This rule represents a gray area in the country's FDI policy, as the defense ministry would determine what constitutes state-of-the-art technology. The FDI cap in the cash-strapped insurance sector has now been approved by the...
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