Govt relaxes FDI norms in defence sector

The NDA government relaxed foreign dir-ect invest-ment (FDI) norms in single brand retail, civil aviation, airports, pharmaceuticals, animal husbandry and food products. It has allowed up to 100% foreign direct investment (FDI) in defence through the approval route, 100% FDI in food product e-commerce, 100% FDI in greenfield pharma via the automatic route, 100% in browfield pharma – of which 74% will be through automatic route – 100% FDI in scheduled airlines, and up to 49% FDI in airlines through automatic route.

While FDI in defence beyond 49% was already allowed through approval route and up to 49% through automatic route, the new norms have done away with the condition of access to ‘state-of-art’ technology in the country for FDI more than 49%. The government has also decided to relax local sourcing norms up to three years and a relaxed sourcing regime for another five years for entities undertaking single brand retail trading of products having ‘state-of-art’ and ‘cutting edge’ technology, which will likely make it easier for companies like Apple to set up manufacturing units in India. Apple CEO Tim Cook had recently met Prime Minister Modi to ask for exemp-tion from the 30% local-sourcing rule for the iPhone maker.

FDI inflows for the financial year ending March 2016 stood at $55.46 billion, up from $36.04 billion in the previous fiscal. Up to 100% FDI through auomatic route has also been permitted for setting up of uplinking HUBs/Teleports, Mobile TV, DTH, and cable networks operating at national, state and district levels, as well as local cable networks.

The government also waived RBI approval or separate security clearance in the setting up of branch/liasion/project offices in defence, telecom, private security or information & broadcasting in cases where FIPB or license/permission by the concerned Ministry/Regulator has already been granted. The new norms also do away with the ‘controlled conditions’ clause for 100% FDI through automatic route in animal husbandry (including breeding of dogs), pisciculture, aquaculture and apiculture sectors.

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