Economic Reforms Continue
Delicensing of coal and lignite, petroleum
(other than crude) and its distillation products and bulk drugs.
Delicensing of sugar.
Dereservation of coal and lignite and mineral
Companies were permited to buy-back their own
shares subject to restriction of buy-back to twenty five per cent of paid-up capital and
A National Task Force on Information Technology
and Software Development submitted a 108 point Action Plan in July 1998. The
recommendations have been accepted by the Government and directions for their
implementation have been given to all concerned departments.
Patent bill approved by Rajya Sabha and
subsequently promulgated through an Ordinance.
A number of items, including some farm
implements and tools, have been removed from products reserved for exclusive manufacture
by SSI sector.
The Indian Electricity Act, 1910 and
Electricity (Supply) Act, 1948 have been amended to provide for private investment in
Following enactment of the Electricity
Regulatory Commission Legislation, the Central Electricity Regulatory Commission was set
up, with enabling provision for states to establish their own independent regulatory
The Urban Land (ceiling and regulation) Act,
1976, repealed through an ordinance.
The policy for issuing licenses for providing
Internet services has been announced. There will be no license fee for the first 5 years
and after 5 years a nominal license fee of Rupee 1 wilbe charged.
A National Integrated Highway Project merging
the golden quadrilateral connecting Delhi, Mumbai, Chennai and Calcutta with the East-West
(Silchar to Saurashtra) and North-South ( Kashmir to Kanya Kumari) corridors has been
A new Telecom policy is under preparation.
The Apri1998 Exim policy delicenced 340 items
of import by moving them from the restricted list to OGL.
India unilaterally removed all quantitative
restrictions on imports of around 2300 items from SAARC countries with effect from August
A Free Trade Agreement was concluded on 28
December, 1998 between India and Sri Lanka which will result in zero import tariffs for
most commodities on both sides by 2007.
Payment of interest on dues to exporters for
delays in duty drawback/refund of duty beyond two months.
The scope of Export Promotion Capital Goods
scheme at zero duty has been extended further to certain specified bio-technologies and
small scale engineering industry.
Extension of tax holiday for EOU/EPZ to 10
Permission to set up Private Software
Technology Parks (STPs) for export.
Foreign Direct Investment
Projects for electricity generation,
transmission and distribution and construction and maintainance of roads, highways,
vehicular tunnels and vehicular bridges, ports and harbours have been permitted foreign
equity participation up to 100 per cent under automatic route. The automatic route is
subject to a ceiling of Rs. 1500 crore on foreign equity.
FDI permissible under Non-banking Financial
Services now includes "Credit Card Business" and "Money Changing
Multilateral financial institutions have been
allowed to contribute equity to the extent of shortfall in NRI holdings within the overall
permissible limit of 40 per cent in private sector banks.
FDI up to 49 per cent equity has been allowed
subject to license, in the companies providing Global Mobile Personal Communication by
Satellite (GMPCS) services.
Unlisted companies are permitted to float Euro
issues under certain conditions.
End-use restrictions on GDR/ADR issue proceeds
have been removed except those on investment in stock markets and real estate.
Indian companies permitted to issue GDRs/ADRs
in the case of Bonus or Rights issue of shares, or on genuine business reorganisations
duly approved by the High Court.
The aggregate ceiling for investment in a
company by alNRIs/PIOs/OCBs through stock exchanges has been made separate and exclusive
of the investment ceiling available for FIIs.
Investment limit by a single NRI/PIO/OCB has
been enhanced from 1 per cent to 5 per cent of the paid up capital.
Aggregate investment ceiling for NRIs/PIOs/OCBs
has been raised from 5 per cent to 10 per cent of the paid up capital of a company. In the
case of listed Indian companies the ceiling can be raised to 24 per cent under a General
NRIs/PIOs/OCBs are permitted to invest in
unlisted companies subject to the prevailing norms, procedures, and ceiling applicable in
case of listed companies.
The Government is finalising a scheme for
persons of Indian origin (PIO) for issue of PIOs card which would facilitate a visa free
regime to them along with same special economic, educational, financial and cultural
Foreign Institutional Investors
FIIs permitted to buy or seltreasury bills and
government securities in both primary and secondary markets within overall approved debt
Authorised Dealers have been permitted to
provide forward cover to FIIs in respect of their incremental equity investment in India.
Transactions among FIIs with respect to Indian
stocks will no longer require post facto confirmation from the RBI.
100 percent FII debt funds have been permitted
to invest in unlisted debt securities of Indian companies.
Proceeds of ECB can now be deployed for project
related rupee expenditure in alsectors subject to certain conditions.
The Government has delegated ECB approvals to
RBI up to US$ 10 million under all the ECB schemes.
ECB eligibility under the scheme for exporters
has been raised to three times the average export performance during the last three years
subject to a maximum of US$ 100 million.
Average maturity requirement for ECB under the
long term maturity window which is outside the ECB cap has been reduced.
Domestic rupee denominated structured
obligations have been permitted to be credit-enhanced by international banks/international
financial institutions/joint venture partners.
Prepayment of ECB by Indian corporates has been
allowed if this is met out of inflow of foreign equity.
Prudential regulations for banks tightened to
require provisioning for Central and State Government securities, Government guranteed
loans, and general provision for standard assets.
Risk weight of 2.5 per cent for market risk of
government securities, 20 per cent for state government guaranteed advances in default and
100 per cent for foreign exchange open position.
Minimum Capital to Risk-weighted Asset Ratio
(CRAR) for banks to rise to nine per cent by Apri2000.
Assets in the substandard category to be
classified as doubtful after 18 months instead of 24 months, by March 31, 2001.
Regulatory framework for NBFCs rationalised
Companies which solicit public deposits to comply with revised norms.
Number of companies whose shares must be traded
in de-materialised form increased. Rolling settlement introduced for de-materialised
Conditions for public issue by infrastructure
Primary issues to be compulsorily through
100 per cent book building permitted for issues
above 25 crore.
Bill for strong independent Insurace Regulatory
Authority, and opening of Insurance and Pension funds to private companies introduced in
Parliament; proposed to allow 26 per cent foreign equity and additional 14 per cent NRI
and FII holding.
Bill introduced in Parliament for amending the
Securities Contracts (Regulation) Act, 1956 so as to widen the definition of
"Securities" to cover derivative contracts.
New bill for Foreign Exchange Management, to
replace FERA, introduced in Parliament.
- All the gifts made on or after 1.10.98 exempted from payment of
gift tax by Finance (No.2) Act, 1998.
Tax holiday increased from 5 to 10 years to
industrial undertakings set up in the free trade zones and units in the software
Tax holiday benefits extended to inland
waterways, inland ports, radio-paging, trunking and EDI Network and domestic satellite
- Administrative measures to improve reporting and widening the tax
base include: (i) introduction of a simple one page taxpayer-friendly return form called,
SARAL, applicable to all non-corporate tax payers; (ii) making it obligatory
for assesses to quote their PAN or GIR number in respect of certain high value
transactions; (iii) the presumptive taxation scheme, introduced in 1997-98 budget in 12
cities ,extended to 23 more cities in India taking the totacoverage to 35 cities and two
additional economic criteria added; and (iv) introduction of a new scheme called "KAR
VIVAD SAMADHAN SCHEME" to recover the money locked in litigation both in direct and
- Reduction in import duty on 75 specified machinery from 25 per
cent to 15 per cent to encourage investment in the information technology sector.
- Reduction in basic import duty to a level of 5 per cent ad valorem
on many items related to information technology.
- A number of items which were earlier exempted from excise duty,
would now attract nominal duty of 8 percent.
- Excise duty on a number of products, which were attracting a low
rate of duty raised by 5 percentage points.
- The coverage of service tax was widened to cover 12