FDI relaxation in Union Budget

Q.  Which of the following is/are true regarding the FDI norms announced in Union Budget 2016-17?

1) 100%  FDI  to  be  allowed  through  automatic  route  in  marketing  of  food products produced and manufactured in India.
2) The government will allow 49% FDI in Insurance and 26% FDI in Pension sector through automatic route.

- Published on 21 Mar 16

a. Only 1
b. Only 2
c. Both 1 and 2
d. Neither 1 nor 2

ANSWER: Neither 1 nor 2
  • The government announced the policy of 100% FDI in marketing of food products produced and manufactured in India.
  • This will provide impetus to the foreign investment in food processing sector, benefit farmers immensely and will create vast employment opportunities. This will help farmers get remunerative prices for their produce, transfer of technology and modern agricultural practices required for producing agricultural produce on a large scale to meet the requirements of organized marketing.
  • The entry of FDI in food marketing will incentivize farmers to adopt correct agricultural practices and make internationally acceptable products. It will also address issue of crop wastage.
  • Foreign investment will be allowed in the insurance and pension sectors in the automatic route up to 49% subject to the extant guidelines on Indian management and control to be verified by the Regulators.
  • In the FY’15 Budget, the government had increased the composite cap (including FDI and foreign institutional investment) in the insurance sector (and automatically in the pension sector as well) to 49 per cent from the 26 per cent but with full Indian management and control and through the government approval (through Foreign Investment Promotion Board or FIPB) route.
  • Investors had delayed new investments in the sectors citing ambiguity regarding the rider specifying that management and control should be in Indian hands.

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