Five hundred rupee banknotes are arranged for a photograph in Mumbai. (Photographer: Dhiraj Singh/Bloomberg)

Budget 2019: Government Considers Raising FDI Caps In Media, Aviation, Insurance, Animation

India will consider raising foreign direct investment limits in the media, aviation, animation and insurance sectors, said Finance Minister Nirmala Sitharaman, to boost liquidity and expertise in these industries.

Currently, the FDI cap for these industries is 49 percent.

The government will also permit 100 percent FDI in insurance intermediaries—entities that serve as a bridge between consumers and insurance companies. Insurance penetration in the country is currently around 3.4 percent against the world average of 6.2 percent.

Global FDI flows declined around 13 percent in 2018-19, according to UNCTAD’s World Investment report. During the same time, fund inflows to India rose 6 percent to $54.37 percent, Sitharaman said.

Daksha Baxi, head of international taxation at Cyril Amarchand Mangaldas, seemed disappointed with the measures. “For equity to be interesting, we definitely needed to have foreign companies to be able to claim credit on the taxes they have on dividends in India,” she said. “Divided Distribution Tax needed to be replaced by dividend withholding tax which hasn't been announced. That needs to be taken care of, or I hope that’s being taken care of.”

Here are the key highlights:

  • FDI inflows in India have remained robust despite global headwinds.
  • To examine raising FDI caps in aviation, media, animation, insurance.
  • Will allow 100 percent FDI holding in insurance intermediaries.
  • Local sourcing norms for single-brand retail FDI to be eased.
  • Propose to raise limit on FPI to be at par with FDI.

Proposal To Enter Aircraft Financing

SpiceJet Ltd. gained as much as 2.8 percent, most since July 1 after Finance Minister Sitharaman said it is the right time for India to enter aircraft financing and leasing activities, during presentation of the union budget.

Bloomberg Quint

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