The Union Cabinet on Wednesday allowed foreign investment in the Railways for the first time and raised limit for such investment in the defence sector, steps intended to raise funds for expansion of the Railways and encourage domestic manufacture of arms.
100 per cent foreign investment in railway infrastructure projects will be allowed while in the case of defence the limit has been raised to 49 per cent from the current 26 per cent, subject to the Indian owners exercising management control.
100 per cent foreign investment in railway infrastructure projects will be allowed while in the case of defence the limit has been raised to 49 per cent from the current 26 per cent, subject to the Indian owners exercising management control.
The FDI hike in defence is intended to cut imports by indigenising defence production as India is one of the world's largest arms importers.
Foreign investment in defence will be though the approval route, implying it will have to be cleared by the Foreign Investment Promotion Board (FIPB). Though the 49 per cent cap will be general rule for the defence sector, 100 per cent overseas ownership will be allowed in case the investments comes bundled with state of the art technology. Such investment proposals will have to be cleared by the Cabinet Committee on Security (CCS).
FDI is now allowed in PPP projects, suburban corridors, high speed train systems, and dedicated freight lines. Estimates suggest that the opening of railways to foreign investors will add 1-1.5 percentage points to the overall GDP growth. China and Japan are keen to invest in the railways sector.
As a result of these changes, railways transport will be removed from the list of prohibited sectors in the consolidated FDI policy.
As a result of these changes, railways transport will be removed from the list of prohibited sectors in the consolidated FDI policy.
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