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Government Overhauls FDI Rules
Jun 24, 2016

In a major overhaul, the government has relaxed foreign direct investment norms in sectors like food processing and defence and done away with the need for prior government approval for foreign investment in brownfield projects in pharma and aviation. However, it tightened norms around single brand retail trading limiting up to 8 years the waiver for local sourcing norms. Now those entities undertaking single brand retail trading and seeking exemption from local sourcing norms for having state of art and cutting edge technology will get a waiver only for three years with an option of extending it by another 5 years. Earlier, there was no time limit for exemption from local sourcing norms. This means like entities like Apple will now have to take a call if they want to avail the waiver from the new local sourcing norms. They will get a chance to indicate their preference under the new policy.

Key Highlights

  • Up to 100% FDI in defence sector

  • Up to 74% FDI in Brownfield Pharmaceuticals under automatic route

  • 100% FDI in Brownfield airport projects under automatic route

  • 100% FDI in civil aviation

  • FDI Up to 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

  • 100% FDI under automatic route for cable networks, DTH and mobile TV

  • FDI inflows into India rose to $55.46 billion in 2015-16 from $36.04 billion two years ago

  • It’s the second major overhaul of FDI rules in seven months. In November, the government eased norms for overseas investment in 15 sectors.

  • 100% FDI under government approval route for retail, including through e-commerce, in food products manufactured or produced in India.

  • The foreign investment limit is also raised in private security agencies to 74% from the existing 49%. While investments up to 49% will be under the automatic route, investments above 49% will be subject to government approval.

  • Rules are also rationalized rules setting up of branch offices, liaison offices and project offices for businesses in defence, telecom, private security and information and broadcasting, doing away with the need for approval from Reserve Bank of India or a separate security clearance in cases where FIPB or ministry approval have been received.

  • The government also did away with some conditions surrounding 100% FDI in animal husbandry, breeding of dogs, pisciculture, aquaculture and apiculture under automatic route.


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