Modi government’s radical reform, 100% FDI in key sectors

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Government on Monday relaxed Foreign Direct Investment (FDI) norms in a host of sectors including civil aviation, single-brand retail, defence and pharma by permitting more investments under automatic route.

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Other sectors in which FDI norms have been relaxed include e-commerce in food products, broadcasting carriage services, private security agencies and animal husbandry.

An official statement said, “Now most of the sectors would be under automatic approval route, except a small negative list. With these changes, India is now the most open economy in the world for FDI.”

Prime Minister Narendra Modi hailed the decision through his tweet;

The decision to further liberalise FDI regime with the objective of “providing major impetus to employment and job creation in India” was taken at a meeting chaired by Prime Minister Narendra Modi today.

This is the second major reform in the FDI space. The Centre in last November had significantly relaxed the foreign investment regime.

Here are the highlights:

Foreign Investment in Defence Sector has gone up to 100%

Up until now the FDI regime permitted 49% FDI participation in the equity of a company under automatic route.

Foreign investment beyond 49 % has now been permitted through government approval route, in cases resulting in access to modern technology in the country or for other reasons to be recorded. The condition of access to ‘state-of-art’ technology in the country has been done away with.

FDI limit for defence sector has also been made applicable to Manufacturing of Small Arms and Ammunitions covered under Arms Act 1959.

Retail

The government also cleared the way for Apple to open stores in the country by relaxing single brand retail trading norms. The iPhone maker is expected to be a beneficiary of a three-year relaxation the government is introducing on local sourcing norms with an extension of up to five years. Other single-brand retailers like furniture giant IKEA are also expected to benefit.

Pharmaceutical 

The extant FDI policy on pharmaceutical sector provides for 100 per cent FDI under automatic route in greenfield pharma and FDI up to 100 per cent under government approval in brownfield pharma.

The government statement said, “Under the new norms, 74% FDI would be allowed in pharma sector under the automatic route, which means that foreign investors will not need government’s approval to invest up to 74 per cent in existing domestic companies. ”

Aviation

The government also allowed 100% FDI in scheduled airlines, where 49% FDI was allowed under automatic route. However, existing rule that prevents foreign airlines from owning more than 49% in scheduled airlines stays.

Broadcasting carriage services

Teleports (setting up of up-linking HUBs/Teleports); Direct to Home (DTH); Cable Networks (Multi System operators (MSOs) operating at National or State or District level and undertaking upgradation of networks towards digitalization and addressability); Mobile TV; Headend-in-the Sky Broadcasting Service (HITS); Cable Networks  will all be permitted 100 per cent FDI.

(With inputs from agencies, Indian Express and NDTV)

 

1 COMMENT

  1. How did FDI become a radical brahmastra in Modi’s hand, when it was considered an anti-people policy in the hands of UPA, not so long ago?
    Why is none talking anything about the hypocrisy of the rulers?
    How can 100% FDI be allowed in sectors like Pharma? How will we be ever able to implement right to health? how can we ensure healthcare reaches rural under privileged, which forms the major chunk of the population?
    This looks more like a give-up act, let it flood – lets see what all remains and what all washes out, type game.
    No vision – no policy – empty promises – the story so far!!!

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