Govt seeks suggestions to boost FDI inflows, may consider policy tweaks

The Central government has asked industry associations, legal players and regulatory representatives to suggest ways to further improve the business climate for overseas investors to boost the flow of foreign direct investment (FDI) -- which has been on a decline for the last three years.

 

The Department for Promotion of Industry and Internal Trade (DPIIT) on Wednesday held a meeting with industry bodies CII, FICCI, ASSOCHAM, and representatives from the Reserve Bank of India to discuss norms governing inbound investments and to come up with ways to increase overseas equity flow into the country.

 

“The government has sought suggestions on the sectors and areas where the FDI policy can be further liberalised and situations where clarity is required. The discussions included minimum capitalisation norms, beneficial ownership determination criteria, and downstream investments,” a representative from a law firm, who was part of the meeting, said.

 

The industry associations and legal players have been asked to submit their responses in the next two to three days on how to ease the norms.

 

People privy to the development said that the government is looking favourably on measures to attract more FDI in the country and investments in MSMEs.

 

Legal players said that the officials also discussed issues around Press Note 3 which scrutinises investments from land-bordering countries.

 

According to DPIIT, there has been a decline in the FDI equity inflow in the last three years.

 

In the financial year 2021 (FY21), the investments peaked to Rs 4.42 trillion and have been on a decline since. In FY24, the number stood at Rs 3.67 trillion. As of September of FY25, FDI equity inflow stands at Rs 2.49 trillion.

 

Further clarity has been sought from DPIIT on what a foreign owned and controlled company (FOCC) can and cannot do. The legal players also sought clarity on FDI in the skill based gaming industry.

 

“One of the recommendations was that if a financial service activity has been exempted by a financial sector regulator, then there should not be any further government intervention or subject to minimum capitalisation norm. As exemptions were granted when the financial regulators did not find any further need to regulate them, they should not be further regulated unnecessarily,” said a legal player.