India eases rules on FDI in 9 sectors
Print Edition
INDIA yesterday announced sweeping moves to expand foreign investment in civil aviation, defense and a string of other sectors as part of attempts to open up the economy.
The government eased restrictions on foreign direct investment in nine areas as it looks to spur investment in the world’s second-most populous country.
Prime Minister Narendra Modi tweeted that the “radical” changes would make “India the most open economy in the world for FDI” and were aimed at generating jobs for the country’s tens of millions of young people.
Commerce Minister Nirmala Sitharaman said the aim was to make it easier for overseas companies to manufacture in India, notorious for its red tape and labyrinthine regulations.
Under the changes, companies like Apple could move closer to opening stores in India after the government eased rules on local sourcing.
Overseas companies will in future be allowed to own local airlines outright, compared with a previous 49 percent cap, with government approval. Investment in building and modernizing airports around the country will also be eased.
The cap on foreign investment in defense was raised to 100 percent from 49 percent, subject to government approval, in cases which give India access to modern technology.
“These are sectors in which India needs huge amounts of investment and the government’s assessment is that these sectors also need injections of new technology which will lead to productivity gains for the economy,” said Devendra Kumar Pant, chief economist at India Ratings & Research in New Delhi.
Central bank Governor Raghuram Rajan, credited with helping to reform and revive the economy, announced at the weekend that he would not seek a second term in September — raising concern among analysts about the government’s commitment to reform.
Modi stormed to power in 2014, promising an overhaul of the faltering economy. Shortly after taking the reins, his government raised foreign investment caps in the defense and insurance sectors and for some railway projects.
Growth is now chugging along at 7.9 percent, the fastest of any major economy.
But the government has been criticized for failing to implement major reforms to boost investment and help create jobs.
The announcements came after Modi chaired a meeting of his top officials yesterday, looking to increase foreign investment from the US$55.46 billion reached last financial year.
Single-brand foreign retailers can now run stores for three years before having to comply with local sourcing rules.
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