Union Government approves 100% FDI in Aviation, Defence and e-commerce sectors

June 20, 2016

The Union Government has eased foreign direct investment (FDI) norms for nine sectors to give impetus to job creation and ease of doing business in the country.
Decision in this regard was taken at a high-level meeting chaired by Prime Minister Narendra Modi. With these changes, India becomes most open economy in the world for FDI.
Some of these sectors are

Food products: In this sector, 100% FDI under government approval route has been approved.
It will include trading in food products including through e-commerce, in respect of food products manufactured or produced in India.
Defence Sector: Present FDI regime in this sector permits 49% FDI participation in the equity of a company under automatic route.
Now, FDI beyond 49% has now been permitted through government approval route, in cases resulting in access to modern technology in the country or for other reasons.
FDI limit also has been made applicable to Manufacturing of Small Arms and Ammunitions covered under Arms Act, 1959.
Pharmaceutical Sector: In this sector, 100% FDI under automatic route in greenfield pharma has been approved. FDI up to 100% under government approval in brownfield pharma also has been approved.
Aviation Sector: 100% FDI under automatic route in Greenfield and Brownfield Airport Projects to aid in modernization of the existing airports to establish a high standard.
Animal Husbandry: 100% FDI allowed in Animal Husbandry (including breeding of dogs), Aquaculture, Pisciculture and Apiculture under Automatic Route without requirement of controlled conditions.
Single Brand Retail Trading: Entities undertaking single brand retail trading have been relaxed from local sourcing norms up to 3 years.
Entities engaged in of single brand retail trading of products having ‘state-of-art’ and ‘cutting edge’ technology have been relaxed from local sourcing norms up to 5 years.

Comment
With these liberalised changes in FDI Policy, Union government has permitted 100% FDI under government approval route for almost every sector, including defence except in few sectors mentioned in the small negative list. In this list, FDI continues to be prohibited in atomic energy, lottery, gambling, real estate and Real Estate Investments Trusts (REIT) and railways operations.
Background
Since 2014, Union Government has brought major FDI policy reforms in a number of sectors, including Insurance, Pension Sector, Defence, Construction Development and Broadcasting etc. Measures undertaken by the Union Government have resulted in increased FDI inflows at 55.46 billion dollars in the financial year 2015-16. This was the highest ever FDI inflow in India for a particular financial year.

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