India Strengthens FDI Framework with Investor-Friendly Reforms and Policy Enhancements

The Government is actively dismantling regulatory barriers and simplifying business processes to foster a more conducive investment climate.

In a significant move to bolster Foreign Direct Investment (FDI) inflows, the Government of India has reinforced its commitment to creating a transparent, predictable, and easily comprehensible policy framework. The Consolidated FDI Policy circular, dated 15th October 2020 and periodically updated, encapsulates the nation's proactive approach toward attracting foreign capital.

To encourage FDI, the Government has established an investor-friendly environment where most sectors, barring a few strategically sensitive areas, are open for 100% FDI under the automatic route. Currently, over 90% of FDI inflows are facilitated through this streamlined process. Recent policy reforms have targeted pivotal sectors, including:

• Defence: FDI limit increased from 49% to 74% under the automatic route for companies seeking new industrial licenses.
• Telecom: 100% FDI is now permitted under the automatic route.
• Insurance: The sectoral cap has been elevated from 49% to 74%, with the Union Budget 2025 further raising it to 100% for companies that invest the entire premium within India.
• Petroleum & Natural Gas, and Space: Reforms have eased restrictions, encouraging greater foreign participation.

Enhancing Ease of Doing Business (EoDB):

The Government is actively dismantling regulatory barriers and simplifying business processes to foster a more conducive investment climate. Key initiatives include:

• Jan Vishwas (Amendment of Provisions) Act, 2023: Decriminalization of 183 provisions across 42 Central Acts from 19 Ministries/Departments to enhance Ease of Living and EoDB.
• Jan Vishwas 2.0 Bill: A forthcoming legislation aimed at further improving the business environment.
• High-Level Committee for Regulatory Reforms: Announced in the Union Budget 2025, this committee will implement transformational measures to strengthen trust-based economic governance, particularly focusing on inspections and compliance simplifications.

Promoting State-Level Competition and Investment:

To foster a seamless national business environment and encourage state-level competitiveness, the Government has introduced several initiatives:

• Business Reforms Action Plan (BRAP) 2024 Rankings: Highlighting state and union territory performances in business facilitation.
• Logistics Ease Across Different States (LEADS) 2024 Report: Assessing logistics infrastructure and performance.
• Investment Friendliness Index of States: Set to launch in 2025, this index aims to promote cooperative federalism and attract more FDI at the state level.

Impact on Economic Growth:

FDI plays a critical role in supplementing domestic capital, introducing advanced technologies, and enhancing sectoral skills. Beyond direct contributions, FDI generates significant multiplier effects across related industries, stimulating economic growth, boosting production and exports, and creating employment opportunities.

The convergence of these comprehensive reforms and policy initiatives is expected to streamline regulatory processes, reinforce investor confidence, and propel India’s economic growth trajectory.

This information was provided by the Union Minister of State for Commerce and Industry, Shri Jitin Prasada, in a written reply to the Lok Sabha today.