Major Reforms in Foreign Direct Investment (“FDI”) Policy
I. Change from Government Route to Automatic Route:
The following additional sectors and areas are now under automatic route for FDI:
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Defence Sector (up to 49 percent)
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E-Commerce activities (under Single Brand Retail Trading)
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Plantation Sector (certain specified items)
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Up-linking of Non-‘News & Current Affairs’ TV channels, downlinking of TV channels
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Regional Air Transport up to 49 percent
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Duty Free Shops
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Limited Liability Partnerships (“LLP”)
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Share swap transactions
Our Comments
These are reflective of the Government’s focus on facilitating ease of doing business in India and are a means of facilitating foreign investors in exploiting tremendous investment potential available in India. As such, these reforms are good examples of minimum government -maximum governance and should encourage FDI inflows into the country.
II. Cabinet Committee on Economic Affairs:
As per the extant FDI Policy, for sectors under Government approval route, Foreign Investment Promotion Board (FIPB) considers proposals having total foreign equity inflow up to Rs. 3,000 crore and proposals above Rs. 3,000 crore require approval from Cabinet Committee on Economic Affairs (CCEA).
As per revised policy, FIPB to deal with FDI proposals with foreign equity inflow upto Rs. 5,000 crore whereas CCEA nod would be required for such proposals where foreign equity inflow is Rs. 5,000 crore or more.
Our Comments
This is another step of reform to ease the administrative process for the investors with minimal interference of the Government, as projects that require CCEA approval typically take a longer time.
III. Significant sectorial and other reforms
The Government has brought reforms in FDI policy and has eased norms across 15 significant sectors including defence, banking, construction development, single brand retail,