The present level of investments in the Telecommunications, Civil Aviation and Insurance Sectors are insufficient to achieve the targeted growth in these sectors and they need capital for their infrastructure development. The budget proposal to hike the FDI cap limit came as a relief to them. This article attempts to examine the role of FDI and implications of such hike to the respective industries. It also analyzes the importance of FDI in economic reforms and its impact on the overall economic growth of the country.

The recent Union Budget had plenty of ups and downs, and one among them was the rise in FDI cap in the Telecom, Civil Aviation and Insurance sectors. The Finance Minister P Chidambaram while proposing to raise the FDI cap in the Telecommunications, Civil Aviation, and Insurance sectors said "The NCMP declares that FDI will continue to be encouraged and actively sought, particularly, in areas of infrastructure, high technology and exports." He further added that "Telecom, civil aviation and insurance sectors of the economy full meet this description."

With the proposals to raise the FDI limits from 26 to 49% in Insurance sector, 40 to 49% in Civil Aviation, and 49 to 74% in the Telecom sector respectively, the writing on the wall is clear. The Congress-led UPA government would continue on the path of liberalization.

The FDI hike was a long standing demand of the industry. Industry sources believe that foreign investment is the key to growth and also there is an urgent need to infuse huge amounts of capital in these sectors. The increase in FDI cap is a crucial move, as it would boost the industrial growth and create more employment opportunities. The move also makes the business environment more investment-friendly and would attract investors to the capital market. FDI can add competitive edge particularly in the industrial sector.