Indian government takes major FDI liberalization moves, key reform approvals remains a challenge

Inorder to increase inflows to India , the government has taken many steps in a major liberalisation of FDI regime. 15 sector's FDI regulations have been eased, limit on Foreign Investment Promotion  Board(FIPB) is extended to INR50bn from INR30bn. These changes will lead to quicker FDI approvals, also by reducing paperwork.

Rules on FDI have also been diluted in wholesale and retail activities, defence sector, private banks and construction sector, helping improve job creation, boosting the sectors.

Capital account signals will be further opened up, which indicates government's willingness to undertake reforms, besides political setbacks recently.

Government has been easing FDI regime since it took powers, USD17.1bn of net inflows are seen in first half of 2015, last year net FDI was USD 32 bn, following a series of liberalisation steps since September 2015, when Government in conjuction with Reserve Bank, announced opening of bond market to greater foreign paarticipation.

Indian government also started a bankruptcy draft code, with further fiscalisation of oil price profits by indirect taxes. 

"The challenge remains in getting parliamentary approvals for key tax reforms such as the Goods & service tax, which requires two-thirds majority approval from both houses of parliament", says Barclays in a research note.