Changes introduced in the policy include increase in sectoral caps, bringing more activities under automatic route and easing of conditionality for foreign investment. The current policy permits 49 per cent FDI under Government approval route in private security agencies.
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Under the new set-up, 49 per cent will be through the automatic route and for anything beyond, government nod will be required.
The earlier policy allowed FDI in the 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-the-art technology in the country.
The last time the government announced major changes in FDI was November 2015, after the Bihar Assembly election results, and that was seen as an attempt to allay concerns that reforms may slow down due to the BJP’s defeat in the state election.
Liberalisation of the foreign direct investments (FDI) regulations reflects the government’s commitment to reforms and openness, and reassures investors that ease of doing business remains high priority. As part of a second wave of big bang reforms, The government on Monday approved 74% FDI in brownfield pharma and 100% FDI in greenfield projects, both under the automatic route.
Singapore Airlines said in an e-mailed statement that it is happy with the partnership it has with India’s Tata Group at this point, and there are no plans for changes to its 49 per cent ownership of Vistara.
“Our main focus is on creating more jobs and ensuring that India becomes a manufacturing hub and there is a need to encourage foreign investments”, the minister said.
Though her ministry was in favour of relaxing the rules, the Foreign Investment Promotion Board (FIPB) in the finance ministry opposed the same on the plea that it would impact the government’s “Make in India” program, which was launched to encourage local industries. Now, while the cap has been raised to 100 per cent, up to 49 per cent would be under automatic and beyond that will be under the government approval routes, officials said. The decision was taken at a high-level meeting chaired by Prime Minister Narendra Modi today.
A significant change in local sourcing policy for single-brand retail trading could now enable US-based Apple Inc to open stores under today’s decisions which also cover broadcasting carriage services, private security agencies and animal husbandry.
FDI limit for defence sector has also been made applicable to manufacturing of small arms and ammunition covered under the Arms Act, 1959.
Under the rules, a company can seek even 100% FDI if it brings in high-technology under the ‘Make in India’ initiative.
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“The government hopes that if they can show them that is the market where consumers are Apple will be more willing to start manufacturing operations here”, said Neil Shah, an analyst at Counterpoint Research. India’s government announced a three-year exemption for foreign entities-and companies that provide “cutting edge” technology will enjoy an additional five years of a “relaxed sourcing regime”. For NRIs, 100% FDI will continue to be allowed under automatic route. “However, it is felt that the country has potential to attract far more foreign investment which can be achieved by further liberalising and simplifying the FDI regime”.
