Libralising further the Foreign Direct Investment (FDI) policy, Union Cabinet, chaired by Prime Minister Narendra Modi, had approved amendments, including changes in definition of NRIs, to be incorporated in the FDI policy. The government has decided that non-repatriable investments by non-resident Indians (NRIs), overseas citizens of India (OCIs) and persons of Indian origin (PIOs) will be treated as domestic investments and will not be subject to foreign direct investment caps.
As per the amendments for foreign investment purposes, the definitions of OCIs and PIOs were merged with that of NRIs and NRI investment and will be treated as domestic investment. So far, investments by NRIs in only the aviation industry were excluded from the FDI limit of 49%; NRIs were permitted full ownership in the sector.
The government statement added that, since the investments made under Schedule 4 (of the Foreign Exchange Management Act) are on non-repatriable basis, it needs to be clearly provided that such investments, for the purposes of FDI policy, are domestic investments. This will enable investments by NRIs, OCI cardholders and PIO cardholders under Schedule 4 on non-repatriation basis, across sectors without being subjected to any of the conditions associated to foreign investments.
The decision is likely to stoke a fresh round of fund flows into the country, with the overseas Indians now falling outside the FDI ceilings and the space vacated by them can be filled by foreign investors. At the same time, domestic companies can attract investments from overseas Indians without violating foreign investment norms.
