In a major reform push, the government has allowed 100% foreign direct investment (FDI) in single brand retail, civil aviation, defence, airports, pharmaceuticals, animal husbandry and food products. This second wave of FDI reforms after the last radical liberalization of FDI in November 2015, will provide job creation in India, improve infrastructure and make the investment climate in the country more beneficial for attracting foreign investment and technology. The decision was taken at a high-level meeting chaired by Prime Minister Narendra Modi.
In case of civil aviation, the government has allowed 100 percent FDI through automatic route for greenfield projects. For brownfield projects, first 74 percent will be through automatic route, but beyond 74 percent will require government approval. In defence sector, the first 49 percent of investment will be through automatic route. Beyond that, up to 74 percent investment will need government approval. The new norms have done away with the condition of access to ‘state-of-art’ technology in the country for FDI more than 49%.
In the pharmaceutical sector, the government has allowed 100 percent FDI under the automatic route for greenfield projects and has decided to permit up to 74 per cent FDI under automatic route in brownfield (existing) pharmaceuticals as opposed to the government approval route at present. For FDI beyond 74 per cent in brownfield pharma, the government approval route will continue.
In food processing, it was 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. In single brand retail, instead of giving a blanket exemption to companies trading products with cutting edge technology from compulsory domestic sourcing of 30 per cent inputs, the Centre has introduced some limits.
However, the government has also said that the fresh foreign investment beyond 49% 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.
