India overhauls foreign ownership rules

June 20, 2016 11:28 am Published by

India overhauls foreign ownership rules

  • 20 June 2016
  • From the section Business

Indian prime minister ModiImage copyright
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India has announced a radical overhaul of its foreign ownership rules to attract more overseas investment.

Airlines and some defence industries may now be 100% foreign owned – up from 49% and 74% respectively.

And for overseas retailers there’s respite from a rule that required 30% of what they sold to be Indian sourced.

The BBC’s Simon Atkinson in Mumbai said it was the biggest signal yet that the country is serious about attracting more foreign investment.

The move will be welcomed by brands like IKEA and Apple which see India as the next big market, he added

Investment rules in pharmaceuticals and food production have also been relaxed.

“With these changes, India is now the most open economy in the world for FDI [foreign direct investment],” the government said in a statement.

The move comes just days after the head of the Indian central bank, Raghuram Rajan, announced, in a surprise move, that he would step down in September.

Analysis: Simon Atkinson, India Business Editor, Mumbai

So just a couple of days after central bank governor Raghuram Rajan says he is leaving – to howls of anguish about the damage this will do to India’s credibility abroad – we get this.

Sweeping changes to foreign investment rules in some major sectors show that India’s very much open for business to international investment.

Attracting foreign investment into India is the main reason Prime Minister Narendra Modi has spent so much of his first two years in office travelling the world.

A relaxation of arduous sourcing rules, which require foreign retailers to source 30% of what they sell from India, will appeal to companies like Apple. Its boss Tim Cook was here recently and he sees India as the next big market.

Notably there are no steps to let the likes of Walmart and Carrefour come and operate supermarkets here without a local partner. Those firms would love access to India’s growing middle class.

But the howls of protest from the millions running small stores would likely be too much for politicians to bear.

So even if it created jobs and infrastructure, some industries remain just too sensitive when it comes to FDI. A least for now.

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This post was written by FSB News