100% FDI in Defence, Aviation Makes India ‘Most Open Economy’

The FDI norms have been relaxed to “liberalise and simplify the FDI policy” of the country.

Reform measures have resulted in increased FDI inflows at $55.46 billion in financial year 2015-16, according to the PMO. (Photo: iStockPhoto)

The government of India announced sweeping reforms on Monday to rules on foreign direct investment (FDI) – opening up its defence and civil aviation sectors to complete outside ownership.

In aviation, extant policy allowed up to 49 percent foreign equity in scheduled airlines under the automatic route. Now, while the cap has been raised to 100 percent, up to 49 percent would be under automatic and beyond that will be under the government approval routes.

In pharmaceuticals, both greenfield and brownfield projects could get 100 percent foreign capital, but with an automatic route for the former and government route for the latter. Now, brownfield projects, too, will come under automatic route for up to 74 percent.

In defence manufacturing, the 49 percent norm under automatic approval will continue. But while looking at the proposals that call for investment beyond 49 percent, a condition that they will bring with them access to “state-of-the-art” technology has been done away with.

According to the Prime Minister’s Office, the reforms by his government have helped in increased FDI inflows.

Here are the other highlights:

• Foreign equity of 100 percent under government approval for trading in processed foods, including via e-commerce, in respect of products manufactured in India.

• Foreign equity of 100 percent under automatic route in broadcast service industry, including direct-to-home, mobile TV, head-end in the sky and cable networks.

• Equity cap on private security agencies tweaked to permit up to 49 percent under automatic route, and up to 74 percent under government route.

• The requirement of local sourcing relaxed for three years and some sops in this regard for five years for foreign equity in single-brand retailing, for products having state-of-art and cutting edge technologies.

(With agency inputs.)