New Delhi: On Monday, India eased Foreign Direct Investment
(FDI) rules for several sectors, including defence, aviation and retail,
clearing the way for businesses such as Apple to open its stores, in sweeping
changes aimed at conveying the government’s commitment to reforms.
The latest move comes two days after Reserve Bank of India
(RBI) Governor Raghuram Rajan announced that he would return to academia when
his term ends on September 4. Monday’s decisions are also seen designed to
contain any fallout on investor confidence from Rajan’s exit and this week’s
vote on Britain’s future in the European Union.
India’s equity and currency markets, which fell sharply in
early morning trade on Rajan’s announcement, rebounded cheering the new FDI
norms. The 30-share BSE Sensex, which fell 178 points shortly after markets
opened, bounced back to close at 26,866.92 up 241 points.
The rupee also recovered from a 61 paise plunge in the
morning to close 23 paise down at Rs 67.31 to a dollar.
The government lifted overseas investment ceilings for civil
aviation, defence, pharmaceuticals, multi-brand food retail and eased so-called
restrictive conditions for single brand retail. The decision to relax the norms
was taken at a high-level meeting chaired by Prime Minister Narendra Modi on
Monday.
The government also allowed up to 100 percent FDI in domestic
airlines and new airports, a move that will allow foreign companies to fully-own
Indian domestic carriers and ‘greenfield’ airports and upto 74 percent in
existing airports.
In defence, upto 100 percent FDI has now been allowed without
the mandatory condition of bringing in “state-of-the-art” technology by the
foreign partners. FDI limit for defence sector has also been made applicable to
Manufacturing of Small Arms and Ammunitions covered under Arms Act 1959.
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