Increase in FDI Limits

Government has taken a step ahead to catch the rising Current Account Deficit(CAD). It has increased the FDI limit in sectors of telecom and defence. No we have to see whether this effort of the government will prove successful or not.

Benefit for the Economy :
It will reduce the rising CAD and bolster the economy(though its not the permanent solution), but govt have to ensure that same thing does not happen like in the case of FDI in multibrand Retail where even though after allowing FDI in multibrand retail not enough investor came to India because of the stringent restrictions put in by the govt.They have to keep the norms as easy and friendly as possible.

Also FDI in Defence can pose some danger to national security if some loopholes are left in the FDI policy. So stringent control should be imposed on the foreign companies like it is imposed on domestic countries

Benefit for the Companies :
The telecom companies are going to cherish this decision of the cabinet to increase the cap of FDI to 100%. It will allow the companies to reduce their ever increasing debt by selling some stake to the foreign companies.Also those companies who have parked their investments in telcos are likely to get double digit returns on their investments when they sell their stake to the parent co like in case of Piramal group who took 11% stake in vodafone for Rs 5900 crore and now can sell this stake to vodafone and get the double digit returns.