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FDI Relaxed
Hours after Raghuram Rajan said he will not seek a second term as Reserve Bank chief, the NDA government on Monday eased foreign direct investment (FDI) norms in pharma, aviation and defence sectors in what is being called a major reform move.
New Delhi: Hours after Raghuram Rajan said he will not seek a second term as Reserve Bank chief, the NDA government on Monday eased foreign direct investment (FDI) norms in pharma, aviation and defence sectors in what is being called a major reform move.
The Union 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.
The decision to relax FDI norms in key sectors, taken at a meeting chaired by Prime Minister Narendra Modi, is likely to calm foreign investors, rattled by the exit of Rajan, analysts say. The twitter handle @PMOIndia started releasing details of the decision soon after the meeting taking the markets by surprise.
"Centre has radically liberalized the FDI regime, with the objective of providing major impetus to employment and job creation in India", it said initially.
Modi hailed the sweeping liberalisation of foreign direct investment rules, saying they would make Asia's third-largest economy the most open in the world.
The government had last year relaxed FDI norms in about dozen sectors, a move that helped FDI flows to hit an all-time high of $55.46 billion in 2015-16. The relaxation in FDI in more key sectors will provide major impetus to employment and job creation in India, the government said.
"This is the second major reform after the last radical changes announced in November 2015. 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," the government added.
Under the new norms, 74 per cent 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.
The government also allowed 100 per cent FDI in scheduled airlines, where 49 per cent FDI was allowed under automatic route. However, existing rule that prevents foreign airlines from owning more than 49 per cent in scheduled airlines stays.
In the crucial defence sector, foreign companies can own 100 per cent equity, according to the latest rules. Present FDI regime permits 49 per cent FDI participation in the equity of a company under automatic route. FDI above 49 per cent is permitted through government approval on case to case basis.
