Big fdi reforms on way a step taken in haste

India’s government on Tuesday announced plans for a sweeping liberalisation of its foreign direct investment (FDI) regime, as Prime Minister Narendra Modi seeks to counter accusations his reform drive is stalling.

Mr Modi said there was a sharp rise in the ranking of India in the ease of doing business.

India ranked 130 out of 189 countries in the index released last month.

Commenting on the wide-ranging liberalization measures, finance minister Arun Jaitley refused to link the announcement with the Bihar election result where the Bharatiya Janata Party suffered a humiliating defeat.

“FDI is an additionality of resource”.

Compared to their global counterparts, United Kingdom investors are more positive about India’s ongoing tax and regulatory reforms, with 61% finding it attractive, as compared to 54% of global investors. “As and when sectoral requirements so warrant, we will look into it”, he said when asked about which sectors will see such changes in the future.

On allowing 100 per cent FDI in general aviation, the Centre for Asia Pacific Aviation (CAPA) said it’s “a welcome and game changing move”, especially for the helicopter segment.

New Delhi will also eliminate current restrictions on investment in certain sectors including broadcasting and air transport, while also increasing the use of “automatic” routes for gaining investment approval in others. Of this, 49 per cent will be allowed under automatic route and beyond that will need FIPB nod.

“Opening up the manufacturing Sector for wholesale, retail and E-Commerce so that the Industries are motivated to Make In India and sell it to the customers here instead of importing from other countries”.

Proposals for foreign investment in excess of 49 per cent in defence will now be considered by the Foreign Investment Promotion Board.

Foreign investment in the service industry rose 19.4 per cent, with the high-tech service sector seeing a jump of 57.5 per cent to $6.76 billion. 15 sector’s FDI regulations have been eased, limit on Foreign Investment Promotion Board(FIPB) is extended to INR50bn from INR30bn.

Since taking office in May a year ago, the Narendra Modi government has increased FDI limit in the insurance sector to 49 per cent and allowed foreign participation in the defence sector to up to 49 per cent. The government has also allowed up to 100 per cent FDI in railway projects.

FM (FM radio), the foreign investment limit has been raised from 26 per cent to 49 per cent under the approval route. These investments would, however, have a lock-in of three years.

“Necessary conditions for take-off of the Indian economy have been created”.

In order to make it easier for foreign investors, DIPP has also been advised to consolidate all FDI-related instructions from countless government notifications and press notes into a single booklet. Further, each phase of the construction development project would be considered a separate project for the purposes of FDI policy.

Non-residents are treated as domestic investors in civil aviation and construction sectors. All in all we do hope that this takes the sector to higher levels and we are sure that the sector will benefit immensely.