With reference to Secretariat's report (WT/TPR/S/249, page 31, para 35 40), we note the WTO Secretariat's observation that the Indian economy seems to be more open to FDI as a result of recent policy changes. We welcome India's efforts to remove foreign equity limits for micro and small enterprises, and to provide for better understanding and predictability of its foreign investment rules, such as through issuance of the Consolidated FDI Policy. We wish, however, to seek further information in the following areas:
It was noted by the WTO Secretariat that the number of sectors/activities in which FDI is prohibited has increased during the review period. Could India share the rationale for prohibiting FDI in the additional sectors?
The WTO Secretariat also noted there were specific conditions and permits that may apply, even where FDI is allowed up to 100% and under the automatic route, and that such conditions and permits could be more restrictive than an explicit investment cap. Could India share what some of these specific conditions or permits are, and the rationale for imposing them?
Reply: The list of sectors prohibited under both the Foreign Exchange Management Act and FDI Policy as extant at the time of the earlier review, was subsequently consolidated under the FDI policy, vide Press Note 7 (2008), which is available in the public domain. Only one additional sector i.e. "manufacturing of cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes" has since been added. This has aligned the policy with Government's earlier decision of not granting industrial licenses for fresh capacity in the sector.
FDI is permitted up to 100 % on automatic route subject to applicable laws/sectoral rules/regulations/security conditions. These represent the prevailing domestic regulations in the sector.
