INDIA > Government’s Policy Reform Lead to Significant Increase in Inbound FDI in India, Poised for Further Growth

Government’s policy reform lead to significant increase in inbound FDI in India

 

Over the last two years, the government of India has relaxed its foreign direct investment (FDI) policy and requirement, positively impacting around two dozen sectors including defence, food processing, civil aviation, pharmaceuticals and private security agencies. Coinciding with the “Make in India” campaign to promote manufacturing, design and innovation in India, these steps have led to significant FDI equity inflow into India. Over the 20 months period between October 2014 and May 2016, FDI inflow has increased by a whopping 46% (from $42.31 Billion to $61.58 Billion in the previous 20 months)
 
“The government’s systematic focus on economic growth and macroeconomic stability and the measures taken in this regard have made India one of the fastest growing major economies in the world,” the finance minister said. Seeing the first hand results of liberal FDI policy changes, the Indian Department of Industrial Policy & Promotion (DIPP) recently announced further liberal changes in FDI policy. Highlights include:

• 100% FDI in defence, civil aviation and food processing.
• Removal of government’s approval for up to 74% FDI brownfield investment in pharmaceutical companies.
• Raising of the foreign shareholding limit from 5% to 15% in Indian stock exchanges.
• 100% FDI in brownfield airport projects under automatic route
• 100% FDI in civil aviation; FDI upto 49% in civil aviation under automatic route, beyond 49% through govt approval
• Local sourcing norms for FDI in single brand retail for products having “state of art” and “cutting edge” technologies