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“Radical Liberalization” of the Indian Market, Amendments in FDI

July 30, 2016     by Simratjeet Kaur

The Government of India (GoI) in a meeting held on 20th June, 2016, chaired by Prime Minister Narendra Modi, took radical steps to boost FDI in the Indian economy.

Since last 2 years the Government has brought major reforms in Defence sector, Construction Development, Insurance, Pension Sector, Broadcasting sector etc. To further simplify the FDI Policy the GoI has introduced the major reforms whereby most of the Sectors / Activities have been brought under automatic route of approval for investing in India.

Here is a synopsis of earlier limits of the FDI and the reforms introduced:

S. No. Sector FDI Limits PRIOR to notification dated 20th June, 2016 FDI Limits POST notification dated 20th June, 2016
1. Defence Sector Upto 49% – Automatic Route

Beyond 49% – Cabinet Committee on Security on case to case basis.

Upto 49% – Automatic Route

Beyond 49% till 100% – Government Approval on case to case basis.

 

* Condition of access to ‘state of art’ technology has been done away with.

** FDI for defence has also been made applicable to Manufacturing of Small Arms and Ammunitions covered under Arms Act, 1959.

2. Broadcasting Carriage Services

  • Teleports
  • Direct to Home
  • Cable Networks
  • Mobile TV
  • Headend-in-the Sky Broadcasting Services
Upto 49% – Automatic Route

Beyond 49% upto 100% – Government Approval

100% Automatic Route
3. Pharmaceutical – Brownfield Projects

 

100% – Government approval

 

Upto 74% – Automatic Route

Beyond 74% upto 100% – Government Approval

4. Civil Aviation – Brownfield Airport Projects

 

Upto 74% – Automatic Route

Beyond 74% upto 100% – Government Approval

100% – Automatic Route
5. Civil Aviation – Scheduled Air Transport Service / Domestic Scheduled Passenger Airline and Regional Air Transport Service. Upto 49% – Automatic Route

 

Upto 49% – Automatic Route

Beyond 49% upto 100% – Government Approval

 

* Foreign airlines can invest up to the limit of 49% of their paid up capital and subject to the conditions laid down in the existing FDI policy.

6. Private Security Agencies 49% – Government Approval Upto 49% – Automatic Route

Beyond 49% upto 74% – Government Approval

7. Animal Husbandry 100% – Automatic Route but provided the activity is done under “Controlled Conditions” Requirement of “Controlled Conditions” has been done away with.
8. Single Brand Retail Trading (SBRT)  Upto 49% – Automatic Route

Beyond 49% upto 100% – Government Approval

Upto 49% – Automatic Route

Beyond 49% upto 100% – Government Approval

 

* following conditions have been relaxed:

  • local sourcing norms relaxed upto 3 years
  • Sourcing regime relaxed upto 5 years for entities undertaking SBRT of products having ‘state of the art’ and ‘cutting edge’ technology.

 

  • Keeping in mind the proposals made in Budget 2016-17, FDI has also been permitted upto 100% through Government Approval for trading (including e-commerce) in food products manufactured or produced in India.
  • If a Branch Office, Liaison Office or Project Office is established for doing business in the sector of Defence, Telecom, Private Security or Information and Broadcasting, the approval from RBI or any other separate security clearance is not required post the FDI notification dated 20th June, 2016 provided FIPB has given approval or license from concerned Ministry / Regulator has been given.

The radical changes in the FDI policy have been brought in by the GoI to attract inflow of Foreign Exchange in the Indian market and for creation of employment and job opportunities in India.


 

 

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