India liberalizes FDI regime
The Indian government has radically liberalized the Foreign Direct Investment (FDI) regime from June 20, 2016, riding on the success of winning FDI in recent years.
The government said FDI inflows totaled US$55.46 billion in financial year 2015-16, the highest in a particular year and up from US$36.04 billion during the financial year 2013-14.
The government has decided to introduce a number of amendments in the FDI Policy.
Changes introduced in the policy include increase in sectoral caps, bringing more activities under automatic route and easing of conditionalities for foreign investment.
These amendments seek to further simplify the regulations governing FDI in the country and make India an attractive destination for foreign investors.
Details of these changes are given in the following paragraphs:
It has now been decided to permit 100 per cent FDI under government approval route for trading, including through e-commerce, in respect of food products manufactured or produced in India.
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:
1.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.
2.FDI limit for defence sector has also been made applicable to Manufacturing of Small Arms and Ammunitions covered under Arms Act 1959.
FDI policy on Broadcasting carriage services has also been amended. New sectoral caps and entry routes are: 100 per cent FDI in Teleports (setting up of up-linking HUBs/Teleports); Direct to Home (DTH); Cable Networks (Multi System operators (MSOs) operating at National or State or District level and undertaking upgradation of networks towards digitalization and addressability); Mobile TV; Headend-in-the Sky Broadcasting Service (HITS). Cable Networks (Other MSOs not undertaking upgradation of networks towards digitalization and addressability and Local Cable Operators (LCOs))
Infusion of fresh foreign investment, beyond 49 per cent in a company not seeking license/permission from sectoral Ministry, resulting in change in the ownership pattern or transfer of stake by existing investor to new foreign investor, will require FIPB approval
Pharmaceutical
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
(i) 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.
(ii) 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.
(iii) 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% of their paid up capital and subject to the laid down conditions in the existing policy.
Private Security Agencies
The extant policy permits 49 per cent FDI under government approval route in Private Security Agencies. FDI up to 49 per cent is now permitted under automatic route in this sector and FDI beyond 49 per cent and up to 74 per cent would be permitted with government approval route.
Establishment of branch office, liaison office or project office
For establishment of branch office, liaison office or project office or any other place of business in India if the principal business of the applicant is Defence, Telecom, Private Security or Information and Broadcasting, it has been decided that approval of Reserve Bank of India or separate security clearance would not be required in cases where FIPB approval or license/permission by the concerned Ministry/Regulator has already been granted.
Animal Husbandry
As per FDI Policy 2016, FDI in Animal Husbandry (including breeding of dogs), Pisciculture, Aquaculture and Apiculture is allowed 100 per cent under Automatic Route under controlled conditions. It has been decided to do away with this requirement of ‘controlled conditions’ for FDI in these activities.
Single Brand Retail Trading
It has now been decided to relax local sourcing norms up to three years and a relaxed sourcing regime for another five years for entities undertaking Single Brand Retail Trading of products having ‘state-of-art’ and ‘cutting edge’ technology.
The government said the 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. fii-news.com
