reforms to make investing in India easier
INDIA announced on Monday (20) sweeping re- forms to rules on foreign direct investment, clearing the way for Apple to open stores in the country and announcing easier terms for investors in sec- tors ranging from civil aviation to pharmaceuticals.
The move comes two days after central bank governor Raghuram Rajan, a darling of financial markets but under pres- sure from political opponents at home, announced he would not seek another term, a surprise move that raised concerns about whether reforms he set in motion would stall.
Prime minister Narendra Modi hailed the changes to foreign direct investment (FDI) rules, tweeting they would make India “the most open economy in the world for FDI” and provide a “major impetus to employment and job creation”.
Modi, 65, has pitched to global business to come and “Make in India” since winning power two years ago. His government touted a 29 per cent rise in FDI to $40 billion (£27.6bn) in the fiscal year to March as proof the policies are working.
The last time Modi loosened FDI rules was after his Bharatiya Janata Party (BJP) party suffered a heavy defeat in a state election last autumn.
Some companies welcomed the news, but others and industry analysts said changes in several industries appeared limited. For example, while the new rules allow 100 per cent FDI in civil aviation, investment by foreign airlines in domestic carriers remains capped at 49 per cent.
Another new rule allows foreign companies to invest up to 74 per cent in ‘brownfield’ or existing pharmaceuticals projects without government approval. But previous rules allowed 100 per cent foreign ownership if government approval was obtained, and analysts doubted the change would have a big impact.
The new rules, however, do offer relief for single-brand retailers, such as Apple and IKEA, that are finding it tough to meet India’s requirement for them to sell 30 per cent locally sourced goods.
CEO Tim Cook visited India last month on a mission to expand Apple’s presence in the world’s fastest-growing smartphone market, at a time when sales in the US and China have slowed.
Under the relaxed norms, Apple would have three years to meet the sourcing rules, with an extension of another five years if its products are judged “state-of-art” and “cutting edge”.
The new regime also seeks to attract defence contractors hitherto reluctant to transfer technology to India. They would be able to own local operations outright, with government approval, up from a cap of 49 per cent previously.
Saab, the Swedish defence company that recently re-pitched its Gripen fighter jet to the Indian Air Force, welcomed the change. (Reuters)