US urges India to up FDI cap in defence, insurance to 49%

The Obama administration wants India to lift the cap in both defence and insurance sectors, a top US official said.

"One thing that I think the Indian government could do is be to lift the cap on foreign equity in Indian defence firms, from 26 per cent to 49 per cent," the Assistant Secretary of State for South and Central Asia Robert Blake, told reporters at a conference.

Blake said there will be a announcement about sort of a new framework in trade after the US-India summit here next week.

"This is an area where we have been working very hard and made a lot of progress over the last several years. There is a lot of ongoing work that we just need to continue," he said.

"I just think there's a tremendous amount of progress that's already been made... but more is needed. Particularly I talked earlier about the need to continue to open the economy," he noted.

"For example American companies are very interested in seeing investment caps lifted in the insurance sector, in the defence sector, in several other -- in banking, in retail. And all of those would provide significant new opportunities to further expand our trade and investment," Blake said.

The Assistant Secretary of State said trade and agriculture is a major pillar of Indo-US relationship.

"In terms of our trade, it has more than doubled just in the last five years and now exceeds 43 billion dollar. And we expect that growth to continue into the foreseeable future as India's middle class continues to grow and as India's economy continues to open up," Blake said.

US investment also has grown very quickly and now totals about $18 billion, he added.

"And one of the interesting new trends, I think, in our relation is that Indian investment into the US also is growing very rapidly, not quite at the same level, but again, growing very rapidly," he said, adding that it stood at about $10 billion.

"At a time when many of the industrializing and industrialised countries around the world are beginning to experience declining birth rates and shrinking workforces, India's workforce is going to grow substantially over the next 20 or 30 years as a result of very young population," he said.

"So I think that, again, offers some significant opportunities for American investors and American companies," Blake said.