India announces FDI reforms in 15 major sectors

Such foreign manufacturers will also be allowed to do wholesale trading directly. The measures announced to liberalise FDI in a number of sectors are of a major nature. Of course, public investments have their own limitations and the needs can not be adequately met. The Government hopes that its new initiative will spur private investors, both here and overseas, to put their money where their mouth is. Economic reforms remain a priority for the Modi government. It will also make it easier to do business in India. By opening up certain industries the focus will shift to exploring newer markets with growth potential.

However, the government stopped short of lifting the curbs on multi-brand retailers. If companies want to go beyond that, they will need government approval.

The ministry also noted that more foreign firms invested in China through mergers and acquisitions, which accounted for 15.4 per cent of the total FDI in January-October, up from 6 per cent in the same period past year.

The foreign equity limit for non-scheduled airlines has been raised to 100 per cent and that for regional airlines – a new class of players in the world of aviation – to 49 per cent.

Now, FDI up to 49 per cent will be under the automatic route and beyond that, the applications will be approved by the foreign investment promotion board (FIPB) and not CCS.

“The recent FDI announcements covering 16 sectors include many areas of interest to the United Kingdom industry”.

CREDAI’s President sought more clarity on the requirement of completion of trunk infrastructure for foreign investors to exit from their investments.

And as I said foreign investment is certainly an important additionality of resource. The condition of lock-in-period would not apply to hotels and tourist resorts, hospitals, special economic zones (SEZs), educational institutions, old age homes and investment by NRIs. Thus, this action is a very dynamic step in terms of integrating the Indian economy with the rest of the World for attracting investments and technology and generating employment for enhancement of income of the people of India. Shortly after taking the reins his government raised FDI caps in the defence and insurance sectors and for a few railway projects. These investments would, however, have a lock-in of three years. Housing projects needed to have minimum land area of 10 hectares or built up area of 50,000 square metres.

Real-life episodes such as the Nestle Maggi controversy, Nokia’s plant closure by the tax authorities, and the Vodafone tax case may have a far greater impact on FDI decisions than policy documents paying lip service to a friendly business regime.

“Though there is no immediate benefits for other private sector banks as they are outside FII restriction as of now, but this is positive for private sector banks like YES and Axis bank – out of MSCI index as FII holding is near the maximum permitted so limited room for FIIs to buy”. Rules of establishment and transfer of ownership and control of Indian companies have also been relaxed.