Modi opens up for FDI; RSS unhappy

modi3In a bid to give impetus to reforms, the government has eased the norms for the availability of foreign direct investment (FDI) in a slew of sectors, including aviation, defence, and pharmaceuticals. The government even boasted of India having now become “the most open economy in the world for FDI.”

The decision was taken at a high-level meeting chaired by Prime Minister Narendra Modi on Monday, said an official press release. “This is the second major reform after the last radical changes announced in November 2015.  Now most of the sectors would be under automatic approval route, except a small negative list. With these changes, India is now the most open economy in the world for FDI.”

Foreign investment beyond 49 per cent has now been permitted through the 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-the-art technology in the country has been done away with, the release said. “FDI limit for defence sector has also been made applicable to manufacturing of Small Arms and Ammunitions covered under Arms Act, 1959.”

At present, in the pharmaceutical sector, 100 per cent FDI is allowed under automatic route in green-field projects, but government approval is needed in brown-field projects even as 100 per cent FDI is allowed. Now up to 74 per cent FDI under automatic route in brown-field pharmaceuticals would be possible.

Currently, FDI policy on airports permits 100 per cent FDI under the automatic route in green-field projects and 74 per cent FDI in brown-field under the automatic route. For the latter, the limit has been removed.

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, said the release. “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.”

The government has also allowed 100 per cent FDI under government approval route for trading, including through e-commerce in respect of food products.

It has also removed the cap on FDI under government approval route for trading, including through e-commerce, in respect of food products manufactured or produced in India.

The government has also permitted 100 per cent FDI under government approval route for trading, including through e-commerce, in respect of food products manufactured or produced in India.

At present, the FDI regime allows 49 per cent FDI participation in the equity of a defence production company under the automatic route. The FDI above 49 per cent is permitted through government approval on a case-to-case basis, wherever it is likely to result in access to modern and ‘state-of-the-art’ technology in the country.

Now, FDI beyond 49 per cent 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-the-art’ technology in the country has been done away with.

The FDI limit for the defence sector has also been made applicable to the Manufacturing of Small Arms and Ammunitions covered under Arms Act 1959.

Further, the FDI policy on broadcasting carriage services has also been amended.

The RSS-linked Swadeshi Jagaran Manch has opposed the FDI reforms.