The government on Tuesday eased foreign direct investment (FDI) norms for 15 sectors -- including defence, broadcasting, construction and retail trade -- suggesting a determined drive to push the stuttering economic reforms programme despite electoral reverses for the ruling BJP.
The latest move comes two days after the BJP suffered a crushing defeat in the Bihar assembly polls, which sparked concerns the government may go slow on the reforms agenda which has been stuck because of opposition in parliament.
It also comes days before Prime Minister Narendra Modi leaves for the United Kingdom for a visit during which deals worth nearly 10 billion pounds are expected to be signed followed by the G-20 summit in Turkey.
The government’s decision to lift overseas investment ceilings for banking, defence and construction sectors is an apparent move to turn India into a preferred destination for foreign investors.
“This exercise ... is intended on the one hand to further open up sectors for more foreign investments in the country and also to make it easy to invest in India,” the Commerce Ministry said in a statement.
The government also eased norms to spur growth in India’s booming e-commerce space, and relaxed restrictive “local sourcing” conditions for single-brand retailers, a move that will likely aid companies such as Swedish furniture maker IKEA’s plans to set up operations in India.
In defence production, the government has now allowed companies to raise foreign ownership up to 49% without prior government approval, in line with the aim to turn India into a manufacturing powerhouse through the government’s Make in India initiative.
“If the cycle of economic activity has to go on and as the last few months growth has been driven by public investment, some private investment and increased FDI is necessary ... There could not have been a better occasion than the eve of Diwali for such an announcement,” said Finance Minister Arun Jaitley.
The government also raised the foreign investment ceiling in news broadcasting to 49% from 26% and up to 100% in the non-news broadcasting.
Foreign investment norms have also been eased for the construction sector to enable companies to sell equity to investors in different phases of a project, a sign that the government wants more funds to come into India’s cash-starved infrastructure sector to build roads and ports.
The revamped FDI norms come less than two months after Modi hard sold the India growth story on his second visit to the US.
The government’s pitch for investment comes at a time when many global companies are seeking an alternative to China as costs and risks there rise.
The Make in India campaign is as much an invitation to domestic and foreign companies as a promise to rectify everything that has kept the country almost at the bottom – ranked 130 -- of the World Bank’s ease of doing business’ index.
“The crux of these reforms is to further ease, rationalise and simplify the process of foreign investments into the country and to put more and more FDI proposals on automatic route instead of government route where the time and energy of the investors are wasted,” the government said in a statement.