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Q. FDI in aviation sector: How Indian aviation sector will benefit from newly liberalised FDI norms.
Jun 22, 2016 Related to : GS Paper-3

Ans :

Introduction-

Recently central government has eased norms for Foreign Direct Investment (FDI) in various sectors including civil aviation. According to new norms 100% FDI will be permitted in civil aviation sector, out of which 49% will be permitted under the automatic route, FDI beyond 49% will come through government approval.

Now 100% FDI is now allowed in airports, airlines, ground handling, flying training institutes and maintenance, repair and overhaul (MRO) units. Though new norms provide 100% FDI, but it limits FDI by foreign airlines to 49%.

Impact of new FDI norms-

  • Raising the FDI limit for airlines to 100%, will boost the civil aviation sector, as they suffering from shortage of capital.
  • Domestic players who are looking to raise capital or forge an alliance with foreign airlines will benefit from new policy. The opening of FDI will help bring in much needed capital for domestic players.
  • The FDI relaxation will make existing operating airlines a good vehicle for many overseas companies that will be favourably inclined towards India and will be looking to have or want to increase their exposure in the country.
  • Similarly new norms will attract new players into aviation sector and which will increase the competition. The increased competition will bring down the air prices and enhance air penetration both domestic and international route.
  • The 100% FDI in airports ties in neatly with the new civil aviation policy’s attempt to boost the construction of airports in Tier-B and C cities.
  • 100% FDI in MRO units will further enhance the MRO activities and it will also generate large scale employment for Indian youths.

Conclusion-

Latest round of reforms in FDI in aviation sector will bring useful capital to a beleaguered sector. It will be one of the big push to enhance the Indian aviation sector. Liberalised FDI norms with first ever national civil aviation policy will take further step ahead in growth and development of Indian civil aviation sector.


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