NEW DELHI, Feb 5: Various projects are expected to come in the defence production as the government has liberalised foreign direct investment (FDI) norms in the sector, a top official said on Friday.
The FDI limit in the defence manufacturing under automatic route has now been raised to 74 per cent from 49 per cent.
“Our FDI regime is most liberalised in the world. FDI in defence production has been liberalised and I expect this to be a major game-changer in India and lots of investments coming into the defence production. We see a lot of projects coming in the sector,” Secretary in the Department for Promotion of Industry and Internal Trade (DPIIT) Guruprasad Mohapatra told reporters here.
Mohapatra also said the government has proposed hiking FDI cap in the insurance sector in the Budget.
The increase in FDI limit from 49 per cent to 74 per cent in insurance companies will have a positive impact on the Indian economy, he added.
It will enable global insurance companies to take more strategic and long-term view on the sector in India, thereby bringing in a greater inflow of long-term capital, global technology, processes, and international best practices, Mohapatra noted.
The secretary said, “…The end consumer will also be benefited from it as it will boost competition, enable consolidation and increase insurance penetration, leading to more innovative and affordable products for the end-consumer”.
Scaling up of insurance operations will lead to significant employment of semi-skilled insurance agents as well as sales force, and the vibrant insurance sector will also support long-term investments in infrastructure projects, which have a long gestation period.
“The proposed increase will bring the insurance sector at par with the private banking sector, where FDI up to 74 per cent is allowed. Higher FDI limits will enable insurance companies to meet their capital requirements, thereby reducing the burden on banks, NBFCs to raise capital for insurance companies,” Mohapatra said.
About promoting the growth of startups, the secretary said the department is working on a credit guarantee fund scheme, which would provide comfort to banking and non-banking financial institutions to lend to budding entrepreneurs.
The objective of the scheme will provide a guarantee up to a specified limit against credit instruments extended by lending institutions to finance eligible borrowers. It will be established with a corpus of Rs 2,000 crore.
It will provide a guarantee to banks, NBFCs and AIFs for collateral-free up to Rs 10 crore loans to DPIIT recognised startups.
According to the department, it will target coverage of guarantees for about Rs 15,000 crore — 3,000 units with an average loan size of Rs 5 crore to the eligible borrowers.
Talking about work on reducing compliance burden reduction for industry, Mohapatra said targets have been fixed for the work.
There are certain activities that would be completed by March 31 and “activities which are little prolonged and which require legislative changes are targeted till August 15,” he said.
There are four focus areas under this exercise and that include decriminalise activities in all rules and norms where it is a “civil wrong”; removal of antiquated and antic acts which have no relevance in current times; and introducing big-ticket reform ideas in the citizen-government interface.
“Can renewals (of licenses) be removed completely or making it (for) longer period; can the registration be faceless,” he suggested.
These measures would help in improving the ease of doing business in the country.
In the next doing business report of the World Bank, “we expect to improve our ranking further”, he noted.
Further, he said the announcements made by the government in the Budget would help boost domestic manufacturing. (PTI)
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