fDi Markets Newswire:

Home / News / India liberalises FDI regime

Policy amendments could mean a complete overhaul of India's climate for foreign investors.

Ahead of prime minister Narendra Modi’s visit to the World Economic Forum Annual Meeting at Davos this month, his cabinet has approved a number of amendments to India’s FDI policy. These amendments are intended to signal the country’s attractiveness as an investment destination. They include 100% FDI under the automatic route for single-brand retail and construction development; foreign airlines allowed to invest up to 49% under approval route in the nation’s flagship carrier, Air India; foreign institutional and portfolio investments (FII/FPI) allowed to invest in power exchanges through the primary market; and last, the definition of ‘medical devices’ amended in the FDI policy.

In the case of single-brand retail, the earlier policy only allowed 49% FDI under the automatic route and up to 100% with the government’s nod. There was also a mandatory local sourcing norm of 30% that was a sticking point for many global retail giants. The latest change raises the FDI limit and allows retailers to offset the value of goods sourced from India for their global operations against the sourcing norm in the first five years. This benefits companies like the Swedish furniture giant Ikea and fashion retailer H&M and they expect the relaxation in sourcing to extend beyond five years. 

The big change in the FDI policy pertains to allowing foreign investments in Air India. Hitherto, foreign airlines were only allowed to take a 49% stake in Indian carriers barring the national flag. However, even with the new change, substantial ownership and control will remain with Indians or a local joint venture partner. The union cabinet has already taken a decision to sell off its stake in Air India and a roadmap is expected to be announced after the budget is presented on February 1. Potential foreign investors are bound to scrutinise the bid conditions closely as Air India is haemorrhaging financially and has a huge debt burden. 

Allowing 100% FDI under the automatic route in real estate broking is expected to encourage start-ups. In the case of power exchanges, the earlier policy allowed 49% FDI under the automatic route. However, FII/FPI purchases were restricted to only the secondary market. Now, they can invest in through the primary market as well. These amendments are intended to “liberalise and further simplify the FDI policy so as to provide ease of doing business in the country”, according to an official statement.

N Chandra Mohan is an economics and business writer based in New Delhi.

This article is sourced from fDi Magazine
fDi Magazine

The fDi Report 2018: Free Download

The fDi Report 2018 promobox

Crossborder investment monitor

fDi Markets - Cross border investment monitor

fDi Markets is the only online database tracking crossborder greenfield investment covering all sectors and countries worldwide. It provides real-time monitoring of investment projects, capital investment and job creation with powerful tools to track and profile companies investing overseas.

Click here to find out more about fDi Markets

Corporate location benchmarking tool

fDi Benchmark is the only online tool to benchmark the competitiveness of countries and cities in over 50 sectors. Its comprehensive location data series covers the main cost and quality competitiveness indicators for over 300 locations around the world.

Click here to find out more about fDi Benchmark

Research report

fDi Intelligence provides customised reports and data research which deliver vital business intelligence to corporations, investment promotion agencies, economic development organisations, consulting firms and research institutions.

Find out more.
Follow us on Twitter