With the objective of providing major impetus to employment and job creation in India, the government on Monday made changes to the FDI policy at a meeting chaired by Prime Minister Narendra Modi.
According to a release by the government, this is the second major reform after the last radical changes announced in November 2015.
Most of the sectors would be under automatic approval route, except a small negative list.
According to the government release, Monday’s amendments to the FDI Policy are meant to liberalise and simplify the FDI policy so as to provide ease of doing business in the country leading to larger FDI inflows contributing to growth of investment, incomes and employment
Here’s a look at the changes:
Foreign Investment in Defence Sector up to 100 per cent
The present FDI regime permits 49 per cent FDI participation in the equity of a company under automatic route.
FDI above 49 per cent 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 per cent 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.
The extant FDI policy on pharmaceutical sector provides for 100 per cent FDI under automatic route in greenfield pharma and FDI up to 100 per cent 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 per cent FDI under automatic route in brownfield pharmaceuticals and government approval route beyond 74 per cent will continue.
Civil Aviation Sector
The extant FDI policy on Airports permits 100 per cent FDI under automatic route in Greenfield Projects and 74 per cent FDI in Brownfield Projects under automatic route. FDI beyond 74 per cent for Brownfield Projects is under government route.
With a view to aid in modernization of the existing airports to establish a high standard and help ease the pressure on the existing airports, it has been decided to permit 100 per cent FDI under automatic route in Brownfield Airport projects.
As per the present FDI policy, foreign investment up to 49 per cent is allowed under automatic route in Scheduled Air Transport Service/ Domestic Scheduled Passenger Airline and regional Air Transport Service.
It has now been decided to raise this limit to 100 per cent, with FDI up to 49 per cent permitted under automatic route and FDI beyond 49 per cent through Government approval.
For NRIs, 100 per cent FDI will continue to be allowed under automatic route. However, foreign airlines would continue to be allowed to invest in capital of Indian companies operating scheduled and non-scheduled air-transport services up to the limit of 49 per cent of their paid up capital and subject to the laid down conditions in the existing policy.