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2nd wave of FDI reforms in aviation, pharma, defence

By FnF Correspondent | PUBLISHED: 20, Jun 2016, 20:04 pm IST | UPDATED: 21, Jun 2016, 13:13 pm IST

2nd wave of FDI reforms in aviation, pharma, defence New Delhi: The second wave of FDI reforms allowing 100 per cent inflows in civil aviation and food processing sectors while easing norms in defence and pharmaceuticals, steps apparently aimed at neutralising fallout of Raghuram Rajan's decision to exit RBI.

A significant change in local sourcing policy for single-brand retail trading could now enable US-based Apple Inc to open stores under today's decisions which also cover broadcasting carriage services, private security agencies and animal husbandry.

The major reform measures were decided at a high-level meeting chaired by Prime Minister Narendra Modi, which was earlier said to have been planned for tomorrow.

The Prime Minister's Office (PMO) said the decisions will make "India the most open economy in the world for FDI", but critics said it was a "panic" reaction to Rajan's decision on Saturday to exit RBI and return to academia after September 4.

The stock markets also reacted positively to the news of FDI reforms even as they recovered from early morning plunge after talking-up by influential marketmen that helped counter Rexit (Rajan's exit) jitters.

Congress spokesman Jairam Ramesh described the decisions as a "panic reaction" which would not have come had Rajan not made the announcement. He also said the Congress does not believe that FDI is a magic wand.

Briefing media, Commerce Minister Nirmala Sitharaman said the decisions would help in attracting more investments, creating jobs and making India the global manufacturing hub.

Asked whether the announcement was timed to counter the 'hangover' of Rajan, she said, "This work was going on for a couple of months. Can all this work be done in a day? It is proper to make the announcement when the work is complete."

Economic Affairs Secretary Shaktikanta Das said the changes would do away with dual clearances of proposals and will boost manufacturing and generate more jobs.

"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," the PMO statement said. The first batch of FDI reforms were announced by the government in November 2015.

The most important announcement made today relates to civil aviation in which 100 per cent FDI has now been allowed in airlines, except by foreign carriers. Norms for overseas investment have also been relaxed in brownfield airports.

Under the present policy, foreign investment up to 49 per cent is allowed under automatic route in domestic airlines. It has now been decided to raise this limit to 100 per cent, with FDI up to 49 per cent under automatic route and beyond that through Government approval.

In the defence sector, the policy has been tweaked to allow 100 per cent FDI by doing away with the condition of access to "state of the art" technology. It has now been modified to "modern or for other reasons", a move that will widen the scope of investment by foreign players.

The new norms have also been made applicable to manufacturing of small arms and ammunitions covered under Arms Act 1959. Under the current policy, FDI up to 49 per cent was allowed under automatic route and beyond that under the approval route. .
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