India to announce major changes to foreign investment policy

The government plans to announce several measures aimed at making it easy for foreign companies to invest in India, Commerce Minister Kamal Nath said Thursday. The new measures, likely to focus on easing investment procedures and raising caps on foreign investment, were expected to be released late Thursday after a Cabinet meeting, Nath told reporters.

"Very, very shortly we are going to make some announcements," Nath said in response to a question about the government's plans to reform India's restrictive foreign investment rules. "We will be streamlining the rules in many sectors."

A senior Commerce Ministry official said the Cabinet may decide to open such sectors as pension funds, mining, and power utilities to foreign investment. The government may allow up to 26 percent foreign equity participation in these sectors, said the official, who asked not be named because the matter was being discussed by the Cabinet. Mining majors like Australia's BHP Billiton are keen to invest in India, where they see its booming economy driving demand for raw materials and their prices.

The official said the government may hold off on allowing foreign investment in the retail industry, a demand being pressed by some of the world's top retailers like Wal-Mart Stores Inc. of the United States and Metro of Germany.

The move to open retail trade has been blocked by communist political parties in the ruling coalition, who argue it would lead to job losses and throw many small traders out of business.

India's coalition government needs support of the communists for a parliamentary majority, and Nath said earlier his ministry is trying to reach a consensus with the leftist allies over retail trade.

The Cabinet meeting Thursday is also expected to review existing sector-specific caps on foreign investment. In recent months, investors from countries like the United States have mounted pressure on the Indian government to increase the existing cap on foreign investment in insurance from 26 percent to 49 percent, reports the AP. I.L.

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