FDI door thrown wide open
In a signal to global investors that the reforms process is on and to cushion the negative impact of the departure of RBI Governor Raghuram Rajan, the government today liberalised the foreign direct investment (FDI) regime, easing norms in nine sectors, including e-commerce in food retailing, single-brand retail, civil aviation, defence, pharma and private security agencies.
The government said it had radically liberalised the FDI regime with the objective of providing a major impetus to employment and job creation.
The government has allowed 100 per cent FDI in civil aviation and food processing. Norms have been eased for animal husbandry and broadcast carriage services.
The decision was taken at a high-level meeting chaired by Prime Minister Narendra Modi. This is the second wave of major FDI reforms after the radical changes announced in November 2015. Now, most sectors will be under the automatic approval route, except for a small negative list. “With these changes, India is now the most open economy in the world for FDI,” a government statement read.
Critics said the FDI announcement was done to mitigate the impact of Rajan’s exit, which had caused apprehension in the minds of foreign investors. Former BJP minister Arun Shourie tweeted, “100% FDI in defence with approval was in existence even before. Why FDI headline is being drummed up again today? To counter Rajan effect!”.
To promote manufacturing of food products, the government has permitted 100 per cent FDI under the approval route for trading, including through e-commerce.
In the defence sector, foreign investment beyond 49 per cent has been permitted through government approval, “in cases resulting in access to modern technology or for other reasons”.
The condition of access to “state-of-the-art” technology has been done away with. The FDI limit has also been made applicable to manufacturing of small arms and ammunition.
The big push has come for the civil aviation sector. As per the present policy, foreign investment up to 49 per cent is allowed under the automatic route in airlines. It has been decided to raise this limit to 100 per cent with FDI up to 49 per cent permitted under automatic route and beyond it through government approval.
Govt opens up sky to foreign players
Overseas investors, barring foreign airlines, can now buy up to 100 per cent stake in Indian carriers; regulations pertaining to airports eased too
Local sourcing norms relaxed up to three years; relaxed sourcing regime for another five years for entities undertaking single brand retail trading of products with a “state-of-the-art” and “cutting edge” technology. Would enable Apple to start operations
Boost for Pharma sector
It has been decided to permit FDI up to 74 pc under the automatic route in brownfield or existing pharmaceutical units. The government approval route beyond 74 pc will continue
Private security agencies
Existing policy permits 49 pc FDI under government approval route. Now, FDI up to 49 pc is permitted under automatic route and up to 74 pc with govt approval