Defense and airlines industries can now be 100 percent foreign owned, after previous rules allowed 74 percent and 49 percent foreign ownership, respectively.
Advertisement
As per a press release: “Now most of the sectors would be under automatic approval route, except a small negative list”. 100 percent FDI has been announced in the defence sector.
However, an analyst said that relaxing FDI norms in airlines may not lead to immediate investments.
“With these changes, India is now the most open economy in the world for FDI”, said a commerce ministry statement. “The official statement is silent, but one would hope that every aspect of the deal, including non-compete clauses, should be under the automatic route so long as the investment is 74 percent or below”, Khaitan’s other partner Rajat Mukherjee said in a statement.
“The decision on FDI liberalisation today (Monday) is a follow-up to the decisions which were taken last November when a whole lot of reforms were announced”, Das said.
In the defence sector, foreign investment beyond 49 per cent has been permitted through the approval route in cases resulting in access to modern technology in the country or for other reasons. It is not compulsory on domestic aviation companies to bring FDI.
While opening up most sectors to foreign investments, the government continues to prohibit FDI in lotteries, gambling, atomic energy, real estate and real estate investment trusts (Reits).
The extant policy permits 49% 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. Besides, it will clear up to 49 per cent FDI in private security agencies under the automatic route, while investments up to74 percent will require government nod.
“Merely allowing 100 per cent investment in food retail would have benefited consumers and farmers but would have been seen as a backdoor entry by MNCs into retailing… something which is an anathema to RSS ideologues”, said officials.
The government today allowed 100 per cent Foreign Direct Investment in trading of food products, including through e-commerce, to provide a boost to the country’s food processing sector.
Moreover, he added, there would be “no pressure on anybody to bring FDI”.
Allowing 100 per cent FDI in scheduled airlines and transport services through the approval route is a big decision, though foreign investors have already been allowed 49 per cent stake in existing players through the automatic route.
Advertisement
Apple is expected to be a beneficiary of a three-year relaxation India is introducing on local sourcing norms with an extension of up to five years possible if it can be proven that products are “state of the art”.
