India Tweaks FDI Rules; Pharma, Aviation Witness Biggest Changes

Take a quick look at the old and the new regulations of India’s FDI policy.

India has been rated as Number 1 FDI destination by several international agencies. (Photo: Reuters)

The Indian government today announced several changes to its Foreign Direct Investment (FDI) policy. The new policy increases FDI limits in food products, aviation, pharmaceuticals, defence and private security among other sectors. Here is a quick look at earlier limits and the new ones.

Aviation

Earlier: Government approval was needed for FDI beyond 74 percent in brownfield airport projects.

Now: No government approval will be needed, 100 percent FDI permitted in brownfield airport projects permitted through automatic route.

Earlier: Up to 49 percent FDI permitted in scheduled airlines, under automatic route. Foreign airlines were permitted to invest but only after government approval.

Now: FDI up to 100 percent is permitted. Foreign investment beyond 49 percent needs government approval. However, foreign airlines cannot invest beyond 49 percent.

Pharmaceutical

Earlier: 100 percent FDI was permitted, under the automatic route, in greenfield pharmaceutical projects. FDI up to 100 percent was also permitted in brownfield pharmaceutical projects, but only after government approval.

Now: 74 percent FDI will now be allowed under the automatic route for brownfield pharmaceuticals. Foreign investment beyond 74 percent will need government approval.

Defence

Earlier: FDI upto 49 percent was permitted under the automatic route. FDI beyond 49 percent was permitted through government approval on a case-to-case basis, only if it resulted in access to modern and ‘state-of-art’ technology.

Now: FDI beyond 49 percent will go through government approval but the condition of access to ‘state-of-art’ technology in the country has been done away with.

Single Brand Retailing

Earlier: Up to 100 percent FDI was permitted, but government approval was needed for foreign investment exceeding 49 percent. In the case of more than 49 percent FDI, the investee company had to comply with a ‘minimum 30 percent domestic sourcing’ clause. The policy did provide for the government to relax sourcing norms for entities undertaking single brand retail trading of products having ‘state-of-art’ and ‘cutting-edge’ technology

Now: The government has decided to relax local sourcing norms for up to three years, and have a relaxed sourcing regime for another five years, for entities having ‘state-of-art’ and ‘cutting edge’ technology.

Private Security

Earlier: FDI up to 49 percent was permitted, but with government approval.

Now: FDI up to 49 percent is now permitted under the automatic route. FDI beyond 49 percent and up to 74 percent will be permitted, with government approval.

Food Products

Now: 100 percent FDI with government approval, will now be permitted for trading locally made food products, including through e-commerce.

Broadcasting Carrier Services

Earlier: 100 percent FDI was permitted in teleports, direct to home (DTH), cable networks, mobile TV, headend-in-the-sky broadcasting service, but investment beyond 49 percent needed government approval.

Now: 100 percent FDI through the automatic route will be allowed in teleports, DTH, cable networks, mobile TV, headend-in-the-sky broadcasting service.

These changes were taken after a high-level meeting chaired by Prime Minister Narendra Modi. They were announced via a government statement but the corresponding changes to the regulations have not been shared. The effective date for these changes has not yet been disclosed.