Global credit rating agency Fitch has described the government’s move to ease foreign investment norms for 15 sectors, including defence, broadcasting, construction and retail trade, as a “significant structural macroeconomic reform”.
This, together with an earlier announced plan to restore the financial viability of the country’s power distribution companies (discoms), indicates that India’s reform momentum remains intact, Fitch Ratings said in its latest report released Thursday.
“The government’s package to revive power distribution companies also underscores the reform momentum,” Fitch Ratings said. “These changes align with the government’s reform agenda, and should support investment and real GDP growth over the long term.”
It forecast India’s real GDP to grow at 7.5% this year and accelerate to 8.0% in 2016 and 2017.
On Tuesday, the government lifted overseas investment ceilings for banking, defence and construction sectors, in a move to turn India into a preferred destination for foreign investors.
The government relaxed the restrictive “local sourcing” conditions for single-brand retailers and allowed companies to raise foreign ownership up to 49% without prior government approval in defence production. Other changes include allowing the Foreign Investment Promotion Board to clear proposals up to Rs 5,000 crore from the earlier Rs 3,000 crore; and allowing property developers to sell completed projects to foreign investors without lock-in periods.
Question marks, however, continue to loom over other big reforms such as the implementation of the goods and services tax (GST), which will require a two-thirds approval in Parliament.