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Liberalized FDI Policy Regime Announced

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The Government of India radically liberalized the FDI regime on June 20, 2016 with the objective of improving ease of doing business in the country leading to growth of investment, income generation and employment. The major FDI policy reforms undertaken by the government in the last two years resulted in increased FDI inflows at US$ 55.46 billion in 2015-16, as against US$ 36.04 billion during 2013-14. India has been rated as Number One FDI Investment Destination by several International Agencies. In order to attract far more foreign investment, the government has introduced a number of amendments in the FDI Policy on June 20, 2016 as detailed below :

100% FDI has been permitted under government approval route for trading, including through e-commerce, in respect of food products manufactured or produced in India. In defence sector, the requirement of “access to modern and state-of-art technology” for FDI above 49% has been changed to “access to modern technology or for other reasons”. Moreover, FDI limit for defence sector has been made applicable to manufacturing of small arms and ammunitions.

In broadcasting carriage services, 100% FDI has been permitted under automatic route for Teleports (setting up of up-linking HUBs/Teleports); Direct to Home (DTH); Cable Networks [Multi System operators (MSOs)]; Mobile TV and Headend-in-the Sky Broadcasting Service(HITS). In brownfield pharmaceuticals, FDI under automatic route has been allowed up to 74% and approval will be required only for FDI beyond 74%, as against entire FDI under approval route.

In civil aviation sector, with a view to aid modernization of existing airports and help ease the pressure on the existing airports, FDI in Brownfield Airport Projects under automatic route has been increased from 74% to 100%. FDI in Scheduled Air Transport Service/Domestic Scheduled Passenger Airline and regional Air Transport Service has been increased from 49% to 100% with FDI up to 49% permitted under automatic route and FDI beyond 49% through Government approval. For NRIs, 100% FDI will continue to be allowed under automatic route.

In Private Security Agencies, FDI up to 49% has been permitted under automatic route and FDI beyond 49% and up to 74% by government approval route as against only 49% FDI under government approval route. For establishment of branch office, liaison office or project office or any other place of business in India in Defence, Telecom, Private Security or Information and Broadcasting, approval of Reserve Bank of India or separate security clearance has been dispensed with in cases where FIPB approval or license/permission by the concerned Ministry/Regulator has been granted. 

The requirement of “controlled conditions” for 100% FDI in Animal Husbandry, Pisciculture, Aquaculture and Apiculture has been done away with. The local sourcing norms have been relaxed up to three years and a relaxed sourcing regime would be in place for another five years for entities undertaking Single Brand Retail Trading of products having ‘state-of-art’ and ‘cutting edge’ technology. These changes have brought most of the sectors under automatic approval route except a small negative list and have made India the most open economy in the world for FDI.