Touted as the biggest ever reform, the NDA government on Monday announced, what it termed, a >“radical liberalisation” of the Foreign Direct Investment (FDI) regime by easing norms for a host of important sectors including defence, civil aviation and pharmaceuticals, opening them up for complete foreign ownership.
Defence
Liberalised norms may nudge arms-makers to bite the bullet
The government's decision to liberalise conditions allowing 100 per cent FDI in the defence sector may result in at least some foreign entities setting up subsidiaries in India.
Earlier, FDI beyond 49 per cent was permitted through approval route in cases of access to modern and 'state-of-the-art' technology.
Under the new rule 49 per cent FDI in defence will be allowed under the automatic route, and beyond that government approval is mandatory.
Now, the government has done away with the 'state-of-the-art' technology clause. > Read more
Reliance Group, Tata Group, Mahindra Group and Bharat Forge have already signed MoUs with foreign firms to set up defence manufacturing facilities.
Food
Made-in-India food products more delectable
The new FDI rules is expected to give big push to the marketing of food products made in India. As the announcement extends to e-commerce, the likely beneficiaries are firms such as Bigbasket and Gofers — but one needs to wait for the final blueprint.
The only possible dampener is that the demand of industry to allow restricted retailing of essential commodities [like detergents], along with food products, does not seem to have been accepted. > Read more
Pharma sector
M&As to be an active ingredient in pharma
With 100 per cent FDI allowed in pharma, mergers and acquisitions (M&A) by multinational companies are likely to intensify in the sector, attracting a sizeable amount of funds.
It has been decided to permit up to 74 per cent FDI under automatic route in brownfield projects and approval route beyond that. > Read more
Single-brand retail
Three-year respite for Apple
For players like Apple and the Chinese electronics manufacturer LeEco, the new FDI norms for single-brand retail are a mixed bag.
Local sourcing norms have been eased in Single brand retail for three years and a relaxed sourcing regime have been introduced for five years.
After a three year blanket exemption, the local sourcing norm will, however, kick in for companies producing goods with “cutting-edge and state-ofthe-art technology”.
Companies such as Apple and LeEco which had sought a waiver from the 30 per cent mandatory local sourcing norm, will now have to take a call on whether they want to seek a waiver under the new norms and re-apply. > Read more
Aviation
Foreign investors can have the cockpit to themselves
Opening up foreign investments in the civil aviation sector, the Union government allowed overseas entrepreneurs, other than airlines, to bring in up to 100 per cent FDI to set up an airline in India. However, foreign airlines will be permitted to invest only up to 49 per cent in an airline.
To give a fillip to airport modernisation, 100 per cent FDI will be allowed for existing airports under the automatic route.
Foreign airlines, at present, own stake in Jet Airways, Vistara and AirAsia India. In 2013, Jet Airways sold a 24 per cent stake to Etihad Airways. Vistara is a joint venture between Tata Sons (51 per cent) and Singapore Airlines (49 per cent). AirAsia Bhd owns a 49 per cent stake in AirAsia India and Tata Sons 51 per cent. > Read more
Prohibited list
FDI continues to be prohibited in lottery, gambling, atomic energy, real estate investment trusts (ReIT), and railway operations.
