When it comes to foreign direct investment (FDI) reforms, the Union Budget 2021 has only blessed the insurance sector this time. Although this reform comes with some caveats, nonetheless, the Budget proposal is welcome as it allows the sectoral cap in insurance to be increased from 49% to 74%. Going by the Budget announcement, irrespective of this increase in shareholding limit, the majority of directors and key management persons of Indian insurance companies will still have to be resident Indians.

Nevertheless, this is a good move for insurance and should attract FDI in this sector. While insurance has been the beneficiary this time, a few other crucial sectors continue to crave for more such reforms. For example, in another major financial services sector—the pension sector—the FDI cap continues to be at 49%. In the healthcare sector, which is one of the favourites in the Budget this time with large allocations made for it, the FDI cap in brownfield pharmaceutical projects continues to be 74%. Any FDI beyond 74% still requires government approval.

There are some other sectors which have huge potential for growth. They can deliver large value if favourable regulatory environment is made for them. A more liberalised regime with clearer FDI provisions could help attract FDI inflows in these sectors. Take for instance real estate and e-commerce. Although being relatively nascent sectors, both have delivered promising results.

That the real estate sector has witnessed growth is evident from some recent successful public offerings by real estate investment trusts (REITs). Fortunately, the Budget had some good news for REITs. They are now exempted from any tax deduction at source on dividend payout. Although having witnessed success, real estate has been one of the sectors hardest hit by the Covid-19 pandemic. Any relief for this sector or at the least tweaking in some existing laws or clarifying some ambiguous provisions in the FDI rules can bring some cheer.

For example, the FDI policy doesn’t clearly provide if leasing of constructed space/projects is allowed. Although the FDI policy on leasing has been liberalised over a period, it still suffers from some ambiguity. It is still not clear if leasing (other than when leasing is of an excess space which is permitted) is allowed or not. Allowing FDI in a full-fledged leasing business would be a good idea.

Another sector showing great prospects is e-commerce. Indian consumers are moving towards online shopping. Confined to their homes during the lockdown and left with limited choices for shopping, the Indian consumers have got some real and great experience of online shopping. This trend is now likely to continue even post the Covid-19 pandemic. More people are likely to move to online shopping.

Therefore, FDI-funded e-commerce entities will keep craving for a more liberalised regime and further opening up of this sector. There is no doubt that FDI rules on trading—be it the brick-and-mortar stores or e-commerce formats—have witnessed liberalisation. From allowing FDI in wholesale trade to single-brand retail to multi-brand retail and now permitting marketplace e-commerce, the FDI policy in this sector has come a long way. Despite these liberalisations, the inventory-based e-commerce model is still prohibited by law.

Favourable policies coupled with a clearer FDI regime will surely give an impetus and attract big-ticket FDI. Unfortunately, stringent FDI regulations and ambiguities around them continue to act as a roadblock.

It’s news now that FDI rules governing e-commerce are up for changes again. It seems that some amendments will be announced soon. This time the changes are aimed at ensuring that FDI rules on e-commerce are followed not merely in letter of law but in the true spirit of law. Perhaps, this sector continues to be looked at with suspicion. Frequent amendments could hurt investments and create doubts about India being a favourable destination for FDI.

The Budget looks to be good. Not only has it been transparent on the fiscal numbers, it aims at making large capital expenditure without putting any additional burden on taxpayers. However, some sectors will continue to crave for more and wish the Budget had done a little more for them.

Views are personal. The author is a partner with J. Sagar Associates.

Follow us on Facebook, X, YouTube, Instagram and WhatsApp to never miss an update from Fortune India. To buy a copy, visit Amazon.