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Centre working on improving PLI to increase FDI flow

The Indian government is working on improving the performance-linked incentives (PLI) to improve the flow of foreign direct investments, Department for Promotion of Industry and Internal Trade (DPIIT) Secretary Rajesh Kumar Singh said.

India currently has 14 PLI schemes across sectors like bulk drugs, medical devices, pharmaceuticals, telecom, white goods, food processing, textiles, and drones, to name a few.

Latest data showed that FDI inflows in India fell 13% between April and December 2023.

The fall was prominent in computer hardware, software, telecom, automobiles, and pharmaceuticals. These are areas where the government has already offered production-linked incentives.

“FDI was 2.5% of GDP 10 years ago, and today it’s over 4%. There is a dip in FDI inflows, but in India, it (the decline) is lower compared to other competing nations. We are at number eight in the world in terms of FDI inflows,” Singh said.

Data released in January 2024 showed that India received ₹1.03 lakh crore in investments (both from domestic and foreign investors) thanks to the PLI scheme across the 14 sectors. The government has paid ₹44,150 crore in incentives so far and expects to end the financial year ending March 2024 with another ₹11,000 crore as incentives.

A foreign investor can take up to 74% stake in a satellite manufacturing company without government approval.

Foreign investors can take up to 49% stake in manufacturing satellite launch vehicles.

100% FDI allowed via the automatic route for makers of satellite components.

Earlier in 2021, the FDI limit in the insurance and defence sectors was raised from 49% to 74% under the automatic route.

The FDI limit in telecommunications was raised to 100% from 49% under the automatic route in 2021.

While the overall cap for FDI in the oil and gas sector remains at 49% under the automatic route, the government opened a window for 100% FDI in state-owned oil and gas companies where the stake sale by the government is approved.

‘Automatic route’ implies foreign companies investing in India do not need government approval.

Any investment in sectors like airports, construction, industrial parks, mining, manufacturing, and information technology does not need government approval, i.e., it is allowed under the ‘automatic route’.

On the other hand, some sectors like insurance, pharmaceuticals, defence, and banking have certain limits. For instance, any investor can take up to a 49% stake in an air transport services company or a private bank through the automatic route.

However, if someone wants to invest more money for a higher stake than 49% in the sectors mentioned above, they would need the government’s approval. CNBCTV18

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