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India must look at ways to hike FDI caps in multi-brand retail, defence, insurance: CII-USIBC report

26 Feb 2020 Evaluate

A joint report by the Confederation of Indian Industry (CII)-US India Business Council (USIBC) has stated that India must look at ways to hike foreign direct investment (FDI) caps in sectors such as multi-brand retail, defence and insurance as these are the areas where US technology and expertise could help bring in much needed resources and infrastructure. It also said that both the countries must take a long-term and comprehensive view on issues pertaining to e-commerce sector by taking all concerns into account before finalising any policy.

According to the report, India's e-commerce policy has engendered a whole host of issues that impact both domestic and foreign players, including definition of private versus community data; prohibition on cross-border data sharing; mandate to establish data centres; and domestic versus Indian product definitions. It said India should review the feasibility of increasing FDI caps or additional provisions for foreign ownership in sectors like defence (49 percent except in specific cases where the foreign company is bringing a high end or sensitive technology), insurance (49 percent but with control remaining with the domestic partner), multi-brand retail (though 51 percent foreign ownership is allowed, onerous additional provisions have inhibited growth in this sector). It added that these are high growth areas in India, where US technology, expertise and know-how could help bring in much needed resources, capacity building, infrastructure, and consequent job creation.

The CII-USIBC report further said that India should consider bringing down the import duty on high end motorcycles (that include Harley Davidson motorcycles) to zero for both Complete Built Up (CBU) units and for Completely Knocked Down (CKD) units. The zero per cent rate could apply to all motorcycle imports being sold in India over Rs 5 lakhs (about $7,100). Adding further, it said India and the US should consider launching a comprehensive consultation process, involving sustained dialogue with industry, to examine all facets of the US India partnership to determine the best course of action regarding a formal trade agreement. It said given the enormous consequence of India’s geopolitical, strategic and economic future for the US, a trade architecture that serves both countries well is of utmost importance.

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