Seeking to end ambiguity, the government today proposed to follow the international practice with regard to defining foreign direct investment (FDI) and foreign institutional investors (FII).
"In order to remove the ambiguity that prevails on what is FDI and what is FII, I propose to follow the international practice and lay down a broad principle," Finance Minister P Chidambaram today said in his Budgetary proposals.
He said that "where an investor has a stake of 10 per cent or less in a company, it will be treated as FII and, where an investor has a stake of more than 10 per cent, it will be treated as FDI".
The minister said that a committee would be constituted to examine the application of the principle and to work out the details expeditiously.
India's foreign direct investment inflows declined nearly 19 per cent to USD 1.10 billion in December 2012 due to global economic uncertainties.
For the April-December period of 2012-13, the inflows have declined by about 42 per cent to USD 16.94 billion.
Sectors which received large FDI inflows during the nine months of the current fiscal include services, hotel and tourism, metallurgical, construction and automobiles.
India received maximum FDI from Mauritius, followed by Japan, Singapore, the Netherlands and the UK.
FIIs infused a net amount of USD 4.31 billion (about Rs 23,035 crore) in Indian equities in February so far, taking the total for the year to USD 8.4 billion (Rs 45,094 crore).