Vivek Raghuvanshi
NEW DELHI — The Union Government radically liberalized the Foreign Direct Investment (FDI) regime today, with the objective of providing a major boost to employment and job creation in India. The decision was taken at a high-level meeting chaired by Prime Minister Narendra Modi today, according to a statement released by his office.
Present rules allow 49 percent of foreign ownership in the equity of a domestic company. For higher percentages, government approval was required on a case-by-case basis as officials weigh the impact of foreign owners commanding access to 'state-of-art' technology in the country.
"Foreign investment beyond 49 percent has now been permitted through government approval route in cases resulting in access to modern technology in the country or for other reasons to be recorded,” the government statement reads. “The condition of access to 'state-of-art' technology in the country has been done away with. FDI limit for defense sector has also been made applicable to Manufacturing of Small Arms and Ammunitions covered under Arms Act 1959,” it adds.
"In the last 24 months barely any FDI in defense manufacturing has entered India. This is not in line with government's Make in India initiative, thus this change has been made to encourage original equipment manufacturers (OEMs) to make investments and reach foreign participation greater that 49 percent," a source in the Ministry of Defense said.
"These changes may make it easier for cases for greater than 49 percent FDI applications from the OEMs," Ankur Gupta, a defense analyst with Ernst and Young India said.
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