India: Increase in Cap on Foreign Direct Investment in India in the Telecom Sector

The government of India has given the nod for raising the limit on Foreign Direct Investment in the Telecom Sector to 74 per cent from 49 per cent. Further, foreign equity in state-run banks' holding stakes in telecoms firms will not be included in the 74 per cent cap, was informed by the I&B Minister.

Foreign portfolio investments will be allowed in existing news channels within an existing 26 per cent cap on foreign investment holdings for that sector.

This comes in time when there is a boom in the Indian stock markets as well and in the consumers section. This would clearly go on to attract several players in the telecom sector globally to look forward to investing in India.

Foreign direct investment up to 74% is permitted in the telecom sector.

Internet service (with gateways); infrastructure providers (category-II); radio paging service etc. subject to licensing and security requirements.

- ISPs not providing gateways
- Electronic mail
- Voice mail

Infrastructure providers providing dark fibre. FDI up to 100% is allowed subject to the stipulation that all such companies would confirm to divest 26% of their equity in favor of the Indian public within five years, if these companies are listed in other parts of the world. The above services would be subject to licensing and security requirements, wherever required.

This increase in the FDI limit would see a sea change of investment flowing into India, and have a magnanimous effect on the telecom sector by way of economic reforms and also would affect the economy as a whole, and would have a chain effect on various other sectors. This decision has been welcomed by various industries and association and is a feather in the cap of the present government.

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