Radical change in FDI policy; 100% FDI allowed in defence


The Union government on Monday radically liberalised the FDI regime by permitting 100 per cent foreign direct investment under government approval route for almost every sector including defence.

“With these changes, India is now the most open economy in the world for FDI,” said a commerce ministry statement.

This is the second biggest reform in FDI after November 2015.

The defence sector is now completely opened up to foreign direct investment through government approval route, in cases resulting in access to modern technology in the country or for other reasons to be recorded. The condition of access to ‘state-of-art’ technology in the country has been done away with.

The government also permitted 100 per cent FDI in civil aviation, animal husbandry and trading, including through e-commerce, in respect of food products manufactured or produced in India.

Breather for Apple

The union government has decided to relax local sourcing norms up to three years and a relaxed sourcing regime for another five years for entities undertaking Single Brand Retail Trading of products having ‘state-of-art’ and ‘cutting edge’ technology.

“We will inform Apple to indicate whether they would like to avail the new provisions,” DIPP Secretary Ramesh Abhishek said.

Apple Inc had applied for exemption from 30 per cent local sourcing norm saying it will not be possible to source as much from India they manufacture products having state of art and cutting edge technology.

Though a DIPP secretary-led panel had exempted Apple from local sourcing norms, the Finance Ministry had rejected the panel’s recommendation on the same.

The FDI policy on broadcasting carriage services has also been amended to enable 100 per cent FDI in teleports, DTH, Cable Networks, mobile TVs, and Headend-in-the Sky Broadcasting Service.

Pharma sector too opened up

The extant FDI policy on pharmaceutical sector provides for 100% FDI under automatic route in greenfield pharma and FDI up to 100% under government approval in brownfield pharma. With the objective of promoting the development of this sector, it has been decided to permit up to 74% FDI under automatic route in brownfield pharmaceuticals and government approval route beyond 74% will continue.

Briefing the media, DIPP Secretary Ramesh Abhishek said: “We have been working on reforming FDI policy for quite sometime.”

He said the government has undertaken FDI reforms to make sure that the entire country benefits from it. “These reforms will promote employment, improve infrastructure, and lead to greater FDI inflows. There is already healthy growth in FDI inflows due to the reforms we have already announced so far. These will further improve ease of doing business in india.”

Asked if the timing of the announcement was to ensure a positive narrative on the Indian economy following Raghuram Rajan declining a second term as the RBI Governor, Mr. Abhishek said “it has got nothing to do with that. Today is a good day, so why not announce it today.”

On Rajan’s tenure

The NDA government’s position on RBI Governor Raghuram Rajan has been very nicely explained by Finance Minister Arun Jaitley, Commerce Minister Nirmala Sitharaman said, adding that the government respects Mr. Rajan’s tenure.

Asked whether Mr. Rajan’s tenure as RBI Governor was the shortest, Ms. Sitharaman said, “When (former) prime minister (late) Rajiv Gandhi was in power, an RBI governor was appointed and removed in just 20 days.”

Prime Minister Narendra Modi on Monday reviewed the Foreign Direct Investment (FDI) policy. The meeting was attended by representatives from NITI Aayog, ministries of finance, commerce and industry, and Home.

Source: xaam.in

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