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Investment panel pushes for 49% FDI in retail
By agencies
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Friday, 14 July 2006, 19:30 IST
NEW DELHI: The Investment Commission has recommended large scale increase in foreign investment caps for sectors like banking and insurance and allowing FDI in retail, which have been contentious in the past, as part of a strategy to attract $64 billion FDI by 2009-10.
Though government appears eager regarding the report, which is evident from a meeting convened by PM Manmohan Singh to discuss the 99-page document next week, it could face serious hurdles given the nature of the recommendations and the opposition to its liberalisation moves from various quarters, the Times of India said.
Most radical suggestions appear to be for the financial sector and RBI, leave alone political parties, may oppose them since in the past the central bank has expressed its displeasure on some of the suggested moves.
The panel wants Indian companies to be allowed to hold up to 15 percent stake in Indian banks something that RBI is not comfortable with. There is also a recommendation to increase the foreign investment ceiling in public sector banks from 20 percent to 49 percent, the paper said.
It has also suggested that the Left's opposition to voting rights be over-ruled and investors in private banks permitted to vote in line with their shareholdings. At present investors are unable to exercise voting rights over 10 percent even if they hold majority stake.
While recommending 100 percent FDI in private banks, against 74 percent at present, there is also a suggestion to allow FIIs to pick up 49 percent stake in PSU banks.
The Investment Commission also wants the UPA to raise the foreign investment ceiling for insurance from 26 percent to 49 percent, an announcement which was made by FM P Chidambaram two years ago, the paper added.
While government has been dithering in allowing foreign retail chains like Wal-Mart to set shop in India, the three-member panel has suggested that 49 percent FDI be permitted initially and there should not be any strings attached in the form of number of outlets or permission to open stores only in certain locations.
For wholesale trading, the committee has recommended 100 percent FDI through the automatic route, which would mean that a foreign investor only needs to inform the RBI once the investment has been made, Times of India said.