Hybrid instruments include optionally convertible or partially convertible debentures, Foreign Currency Convertible Bonds - which are intrinsically debt-instruments.
They also give the holders an option to convert into equity at a later date.
"Hybrid instruments are suitable for attracting foreign investments in several niche areas, especially for the startups and venture capital firms. The government will evolve a separate policy for the hybrid instruments," he said while presenting the Union Budget 2018-19.
The minister also announced bringing out a coherent and integrated Outward Direct Investment (ODI) policy.
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"ODI from India has grown to USD 15 billion per annum. The government will review existing guidelines and processes and bring out a coherent and integrated ODI policy," he added.
The government has taken several steps to attract foreign direct investment (FDI) into the country.
Jaitley said that as a result of the reforms undertaken by the government, FDI has gone up and measures taken have made it much easier to do business in India.
FDI during the April-September period in the current fiscal increased by 17 per cent to USD 25.35 billion.
India has attracted USD 43.47 billion FDI in 2016-17, as against USD 40 billion in 2015-16.