India eases foreign investment rules

India eases foreign investment rules

NEW DELHI - The Indian government has made a fresh move to stimulate growth with a widely-anticipated decision to open up the defence, telecommunications and insurance sectors to foreign investors.

Analysts hailed the move - which is subject to Cabinet approval - as a positive step, but said they do not expect a rush of foreign investments just yet.

Regulatory hurdles remain, they said, such as a lack of coordination among different government departments.

"This is only one step in the right direction, many more steps need to be followed to see capital flows at the end of the tunnel," said Professor N.R. Bhanumurthy at the National Institute of Public Finance and Policy in Delhi.

"There are multiple agencies pulling in different directions and creating confusion among investors." Mr D.H. Pai Panandiker, head of RPG Foundation, a Delhi-based think-tank, said the government needs to do more to make it attractive for investors to come in.

Still, he said, "it is a good step".

The Indian government, facing a slowing economy and sinking rupee amid corruption scandals, is keen to restore investor confidence.

On Tuesday night, after a meeting chaired by Prime Minister Manmohan Singh, it decided to allow 100 per cent foreign ownership in the telecoms sector, up from 74 per cent.

The government will also allow investment beyond 26 per cent in defence production on a case-by-case basis in order to "access state-of-the-art technology" and eased rules in other sectors, including doing away with government approval for foreign investment in single-brand retail and petroleum refining.

The decisions are expected to be passed by Cabinet in the coming days.

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