India announces sweeping reforms to FDI rules; Apple, IKEA to benefit

In what is being called as a major reform push, the Government on Monday eased foreign direct investment (FDI) norms in pharma, aviation, food processing and defence sectors.
It has also cleared the way for Apple to open stores in the country by relaxing single brand retail trading norms. The iPhone maker is expected to be a beneficiary of a three-year relaxation the Government is introducing on local sourcing norms with an extension of up to five years. Other single-brand retailers like furniture giant IKEA are also expected to benefit.
The decision to relax FDI norms in key sectors, was taken at a meeting chaired by Prime Minister Narendra Modi. The reforms announcement comes two days after India’s central bank governor Raghuram Rajan, announced he would not be available for reappointment when his term expires in September.
“Now most of the sectors would be under automatic approval route, except a small negative list. With these changes, India is now the most open economy in the world for FDI,” said an official statement.
This is the second major reform after the last radical changes announced in November 2015.” The new reforms will give major impetus to job creation and infrastructure,” tweeted Modi, announcing the new rules.

Under the new norms, 74 per cent FDI would be allowed in pharma sector under the automatic route, which means that foreign investors will not need government’s approval to invest up to 74 per cent in existing domestic companies.
The Government also allowed 100 per cent FDI in scheduled airlines, where 49 per cent FDI was allowed under automatic route. However, existing rule that prevents foreign airlines from owning more than 49 per cent in scheduled airlines stays.
In the crucial defence sector, foreign companies can own 100 per cent equity, according to the latest rules. Present FDI regime permits 49 per cent FDI participation in the equity of a company under automatic route. FDI above 49 per cent is permitted through Government approval on case to case basis.
Key highlights:
—Up to 100 per cent FDI in defence sector
—Up to 74 per cent FDI in Brownfield Pharmaceuticals under automatic route
—100 per cent FDI in Brownfield airport projects under automatic route
—100 per cent FDI in civil aviation
—FDI up to 49 per cent in civil aviation under automatic route, beyond 49 per cent through govt approval
—100 per cent FDI under automatic route for cable networks, DTH and mobile TV