The budget of 2016 has brought bold steps by facilitating FDI in various sectors. As per the proposal there is significant relaxation in the FDI policy of the Government in several sectors, including insurance, pension, asset reconstruction companies and Food Processing Industry to attract more overseas investments. FDI Liberalization in Budget 2016.

FDI into India has already increased by 40% to US$ 29.44 billion during April-December in the current fiscal. The move is expected to further boost the foreign investment cycle in the country.

 

In the insurance and pension sectors, foreign investment will be allowed through automatic route for up to 49 percent subject to certain regulatory formalities. Earlier, foreign investment up to 26 percent was allowed through automatic route.

 

Similarly, in regards to FDI in Asset Reconstruction Companies (ARCs) the ceiling of 49 % has been replaced with 100 % that shall be permitted through automatic route in this sector.

 

Both the sectors are of high importance to the Financial Industry of the country and it can be said that these initiatives will help the cash starved industry to meet the demand. Also these proposals will help the Banking industry to reduce the high amount of NPA’s which they are carrying in their Balance Sheet.

The Stock Market has also something to cheer. Investment limit for foreign entities in Indian stock exchanges will be on par with domestic institutions and thus the limit shall be enhanced from 5 percent to 15 percent.

Additionally to nullify the need of getting prior approval of the Government, the Finance Minister has proposed to increase the existing limit of 24 % to 49% for investment by Foreign Portfolio Investors (FPIs) in Central Public Sector enterprises (except the Banks).

The Government has also increased the sectoral limit of FDI in Food Processing Industry where 100% FDI will be allowed through FIPB Route. FIPB or Foreign Investment Promotion Board is a national agency which provides the single window clearance for proposals on FDI in India.

All in all it can be said that the Budget of 2016 has facilitated a huge opportunity for the Foreign Investors where they can invest in important and growth oriented sectors without much hassle.

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