On Monday, government decided to significantly change FDI norms in India. It relaxed Foreign Direct Investment (FDI) norms in a host of sectors including civil aviation, single-brand retail, defence and pharma. The new norm now permits more investments under the automatic route.
Other sectors in which FDI norms have been relaxed include e-commerce in food products, broadcasting carriage services, private security agencies and animal husbandry.
“…With these changes, India is now the most open economy in the world for FDI,” said an official statement.
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.
This is the second major reform in the FDI space. The Centre in last November had significantly relaxed the foreign investment regime.
Among the major decisions, government allowed 100 per cent foreign investment in “scheduled air transport service/domestic scheduled passenger airline and regional air transport service”.
Under the new regime, 49 per cent would be via automatic route and beyond that limit, government nod would be required.
At present, up to 49 per cent FDI is permitted in scheduled airlines.
“For NRIs, 100 per cent FDI will continue to be allowed under automatic route.
“However, foreign airlines would continue to be allowed to invest in capital of Indian companies operating scheduled and non-scheduled air-transport services up to the limit of 49 per cent of their paid up capital and subject to the laid down conditions in the existing policy,” the release said.
In defence sector, foreign investment beyond 49 per cent has been permitted through approval route in cases resulting in access to modern technology in the country or for other reasons.
The government has done away with the clauses pertaining to the ‘state-of-art’ technology.
Earlier policy allowed FDI in defence sector beyond 49 per cent under the approval route on a case-to-case basis subject to the condition that it would result in access to modern and ‘state-of-art’ technology in the country.
FDI limit for defence sector has also been made applicable to manufacturing of small arms and ammunitions covered under Arms Act 1959.
As regards single-brand retail trading (SBTR), it has been decided to relax local sourcing norms for up to three years and a relaxed sourcing regime for another five for entities undertaking SBTR of products having ‘state-of-art’ and ‘cutting edge’ technology.
With the objective of promoting the development of pharma sector, it has been decided to permit up to 74 per cent FDI under automatic route in brownfield projects and continue the present system of approval route beyond 74 per cent.
Under the existing policy, 100 per cent FDI is allowed under automatic route in greenfield pharma and 100 per cent under government approval in brownfield pharma.
In case of private security agencies FDI up to 49 per cent is now permitted under automatic route and up to 74 per cent under the government approval route. The current policy permits 49 per cent FDI under government approval route in private security agencies.
The government has also permitted 100 per cent FDI under automatic route in several wings of the broadcasting carriage services which include teleports, direct-to-home, cable networks, mobile TV and headend-in-the sky broadcasting service.
However, the statement said: “Infusion of fresh foreign investment beyond 49 per cent in a company not seeking licence/permission from sectoral ministry, resulting in change in the ownership pattern or transfer of stake by existing investor to new foreign investor, will require FIPB approval.”
In order to promote manufacturing of food items, the government decided to permit 100 per cent FDI under approval route for trading, including through e-commerce in respect of such products manufactured or produced in India.
(With inputs from PTI)