Signalling a long-term stability in its foreign investment policy, India has offered to bind itself to allowing 100 per cent foreign equity in key services sectors like shipping, hotel and travel.

Simultaneously, India is also proposing to raise its present commitments in banking, venture capital, healthcare and computer-related services.

India's initial offers for services negotiations at the World Trade Organisation do not propose any bindings in life and non-life insurance underwriting, except freight. It has, however, offered largely unbound commercial access through branches and subsidiaries in the reinsurance business.

For banking, India has proposed to allow foreign banks to invest 49 per cent through the FDI route but has raised the ceiling on foreign investment from 49 per cent to 74 per cent for locally incorporated joint ventures. It has also chosen to maintain the existing foreign investment commitments in telecom, engineering and construction.

ON THE TABLE AT WTO
Service	Gats binding (%)	Present cap (%)	Binding offered (%)
Tourism and travel*	51	100	No cap
Shipping	None	100	No cap
Banking	49	74	74
Insurance underwriting	None	26	None
Venture capital	51	100	74#
Telecom	25	49	25
E-mail	51	100	51
Computer-related@	51	100	74
* Includes hotels, travel agencies and tour operators # For financial sector companies excluding banks which will attract 51% cap @ Includes consulting, software, data base and maintenance and repair services

The offers, submitted in January this year, however, proposed Foreign Investment Promotion Board approval for acquisition of shares in Indian companies though several sectors are already under the automatic route.

Once a certain commitment is made, the government loses the flexibility to reduce the foreign investment ceiling below the prescribed level. It can, however, go beyond the bindings through autonomous liberalisation as has been done in most sectors. India was the only developing country to have submitted its offers indicating the direction of services sector liberalisation, commerce ministry officials said.

For health services, India has offered to allow 74 per cent foreign investment, instead of 51 per cent under Gats, which was signed in 1994, but has proposed the condition that such investments should result in the entry of latest technology. The offers for negotiations have also said that publicly funded services may be offered only to Indian citizens or, alternatively, may be made available at differential rates to non-Indians.

In case of shipping too, preferences are proposed for Indian cargo and vessels in addition to prescribing registration requirements for operating under the Indian flag.

The country had not undertaken any commitments at the time GATS was signed. For telecom services like cellular and radio paging, India has offered to maintain the foreign equity ceiling in private ventures below 25 per cent, while it has been decided to retain the cap at 51 per cent for services like e-mail.

In tourism and travel related services, covering hotels, travel agencies and tour operation services, India has committed to 51 per cent foreign investment, though under the present regulatory framework 100 per cent foreign equity holding is permitted.