The government announced sweeping changes in India's foreign direct investment policy, opening up the airline business to 100 percent ownership, relaxing rules for single-brand retail and defense, and putting most sectors on the automatic approval route. This continues the reforms program that was initiated after state polls ended last month.
The announcement also acted as a tonic for markets that were jittery over Raghuram Rajan's surprise weekend announcement that he would return to academics after his term as the central bank governor ends in September. Apple could be a high-profile beneficiary of the changes. Local sourcing conditions have been relaxed for single-brand retailers, helping companies such as Apple to set up their own stores in India. Officials mentioned that the company will need to reapply since its previous application was denied.
The government's move comes as FDI inflows rose to $55.46 billion in FY16 from $36.04 billion in FY14, reflecting India's growing attractiveness as an investment destination and its status as the world's fastest-growing major economy amid global uncertainty.
In the defense sector, the government has dropped the "state-of-the-art" clause for FDI over the 49 percent limit. Instead, under the new policy, FDI up to 100 percent will be allowed through the approval route, where the country gains access to "modern technology," substantially easing the condition. The FDI limit for the defense sector has also been made applicable to small arms and ammunition manufacturing.
In the single-brand retail sector, the government has eased local sourcing norms for up to three years and an additional five years for "state-of-the-art" and "cutting-edge" technology. Under the current rules, such sourcing had to start from April 1 of the year of commencement of business or opening of the first store.
The announcement also acted as a tonic for markets that were jittery over Raghuram Rajan's surprise weekend announcement that he would return to academics after his term as the central bank governor ends in September. Apple could be a high-profile beneficiary of the changes. Local sourcing conditions have been relaxed for single-brand retailers, helping companies such as Apple to set up their own stores in India. Officials mentioned that the company will need to reapply since its previous application was denied.
The government's move comes as FDI inflows rose to $55.46 billion in FY16 from $36.04 billion in FY14, reflecting India's growing attractiveness as an investment destination and its status as the world's fastest-growing major economy amid global uncertainty.
In the defense sector, the government has dropped the "state-of-the-art" clause for FDI over the 49 percent limit. Instead, under the new policy, FDI up to 100 percent will be allowed through the approval route, where the country gains access to "modern technology," substantially easing the condition. The FDI limit for the defense sector has also been made applicable to small arms and ammunition manufacturing.
In the single-brand retail sector, the government has eased local sourcing norms for up to three years and an additional five years for "state-of-the-art" and "cutting-edge" technology. Under the current rules, such sourcing had to start from April 1 of the year of commencement of business or opening of the first store.