India – the most open economy in the world for FDI
The Government of India has announced a very liberalized new Foreign Direct Investment (FDI) Policy and with the changes in the FDI Policy, India is now the most open economy in the world for FDI. The new amendments seek to further simplify the regulations governing FDI and make India an attractive destination for foreign investors. The new changes introduced in the FDI policy, summarized below, include increase in sectoral caps, bringing more activities under automatic route and easing of conditionalities for foreign investment.
1. FDI in Food Products manufactured/produced in India:
Government of India has decided to permit 100% FDI under government approval route for trading, including through e-commerce, in respect of food products manufactured or produced in India.
2. FDI in Defence Sector up to 100%: Present FDI regime permits 49% FDI participation in the equity of a company under automatic route. FDI above 49% is permitted through Government approval on case to case basis, wherever it is likely to result in access to modern and ‘state-of-art’ technology in the country. In this regard, the following changes have inter-alia been brought in the FDI policy on this sector:
Foreign investment beyond 49% has now been permitted 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.
FDI limit for defence sector has also been made applicable to Manufacturing of Small Arms and Ammunitions covered under Arms Act 1959.
3. Pharmaceutical: With the objective of promoting the development of this sector, it has been decided to permit up to 74% FDI under automatic route in brown field pharmaceuticals and Government approval route beyond 74% will continue.
4. Civil aviation: It has been decided to permit 100% FDI under automatic route in Brownfield Airport projects. Government of India has now decided to raise the limit to 100% with FDI up to 49% permitted under automatic route and FDI beyond 49% through Government approval.
5. Review of Entry Routes in Broadcasting Carriage Services: Government of India has decided to permit 100% FDI in this sector. FDI policy on Broadcasting Carriage Services has also been amended.
6. Private Security Agencies: Present policy permits 49% FDI under Government approval route through Private Security Agencies. FDI upto 49% is now permitted under automatic route in this sector and beyond 49% and upto 74% would be permitted under Government’s approval route.
7. Animal Husbandry: As per FDI policy 2016, Foreign Direct Investment in Animal Husbandry, Pisciculture, Aquaculture and Apiculture is allowed 100% under automatic route under controlled conditions. It has been decided to do away with this requirement of within ‘controlled conditions’ for FDI in these activities.
8. Single Brand Retail Trading: It has now been decided to relax local sourcing norms upto 3 years and a relaxed sourcing regime for another 5 years for entities undertaking Single Brand Retail Trading of products having state of art and cutting edge technology.
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