India Now Most Open Economy In World For FDI: PM Modi

Announcing sweeping reforms to rules on foreign direct investment (FDI), the Modi government has eased FDI norms for nine sectors, including defence, food products, civil aviation, pharmaceuticals, broadcasting and retail trade.

Prime Minister Narendra Modi has hailed the move and said they would make India the most open economy in the world.

He tweeted:

The reforms also loosen restrictions on inbound investments in pharmaceuticals and retail.

PM Modi india

PM Modi india

The government on June 20 relaxed norms in several sectors including single-brand retail, e-commerce in food products, broadcasting carriage services, private security agencies and animal husbandry by permitting more investments under automatic route.

The PMO tweeted:

Representational image - an e-commerce company bgr

Representational image – an e-commerce company bgr

E-commerce companies that hawk India-manufactured food products can now get up to 100 per cent FDI. In defence, up to 100 per cent FDI has now been allowed without the mandatory condition of bringing in “state-of-the-art” technology by the foreign partners.

In addition, FDI limit for defence sector has also been made applicable to Manufacturing of Small Arms and Ammunitions covered under Arms Act 1959.

The government has also relaxed local sourcing norms by up to three years for entities undertaking Single Brand Retail Trading of products having ”state-of-the-art” and “cutting edge” technology.

This will likely benefit Apple’s plans to open its signature stores in India as the government relaxed the condition that stipulates companies to source at least 30 per cent of their components or merchandise for being eligible to set up company-run retail stores in India.

A store selling Apple products 9to5mac

A store selling Apple products 9to5mac

Apple currently has Apple-owned stores across the world, including the US, the UK and China. It sells in India through distributors such as Redington, Ingram Micro and Bettel.

The government also allowed up to 100 per cent FDI in domestic airlines and airports, a move that will enable foreign airlines to start operations in India through fully owned subsidiaries. It will also enable stronger fund flow from overseas airport developers.

IGI airport in Delhi hotelsinmathura

IGI airport in Delhi hotelsinmathura

The decision to relax FDI norms in key sectors, taken at a meeting chaired by Prime Minister Narendra Modi, is likely to calm foreign investors, rattled by the exit of Dr Rajan, analysts say.

Ficci Secretary General A Didar Singh called the simplification of policy framework governing investments in strategic sectors like defence and aviation a “huge positive for the economy.” He said: “The Modi administration through these moves has once again highlighted that reform is a continuous process in order to capitalise on the potential India offers.”

Singh said there is now even more reason for global investors to commit themselves for making and doing business in India.

“Liberalisation of the FDI regulations reflects the government’s commitment to reforms and openness, and reassures investors that ease of doing business remains a high priority,” Chandrajit Banerjee CII Director General said.

This is the second major reform in the FDI space. The Centre in last November had significantly relaxed the foreign investment regime.

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