New Delhi, Apr 22 (KNN) The Indian government is exploring the possibility of further liberalising foreign direct investment (FDI) norms in crucial sectors such as banking, insurance, and defence. This move comes after the recent relaxation of FDI rules for the space and satellite industries.

According to officials, while the bulk of FDI reforms have already been implemented, discussions are ongoing to assess if the conditions for these key sectors can be further eased.

However, any changes to the existing norms will be undertaken after the conclusion of the ongoing elections on June 1.

"Some areas in finance and insurance, even in defence, could still be looked at in terms of further reduction. Brainstorming is going on, but it has not reached anywhere," said an official familiar with the deliberations. A final decision will be taken after consultations among officials and stakeholders.

The government's stance is that India should further relax FDI rules, as the country's current policy is more liberal than that of some other nations, officials noted.

"We are more liberal than most of the ASEAN countries, which are generally considered very open," the official added.

Currently, India allows 74 per cent FDI in private sector banking, with up to 49 per cent permitted through the automatic route and government approval needed beyond that. In public sector banking, the FDI cap is fixed at 20 per cent through the government route.

For the insurance sector, India permits 49 per cent FDI in insurance companies through the automatic route and 100 per cent in insurance intermediaries, subject to certain conditions.

In the defence industry, FDI can go up to 100 per cent in the manufacture of small arms and ammunition under the Arms Act, with up to 74 per cent permitted through the automatic route, subject to conditions.

This move comes amid a 13 per cent year-on-year decline in FDI equity inflows to USD 32.03 billion during the April-December 2023 period.

The United Nations Conference on Trade and Development (UNCTAD) has attributed the FDI slump in developing nations to weak investment and economic uncertainty.

(KNN Bureau)