Unveiling sweeping liberalisation of foreign investment norms on Diwali day, the government has opened up 15 sectors including real estate, defence, civil aviation and news broadcasting to foreign direct investment this week, in a bid to push up reforms just ahead of the Prime Minister's UK visit.
While restrictions in the construction sector were freed up by allowing overseas investors to exit and repatriate investment even before project completion, foreign direct investment (FDI) up to 49 per cent in defence firms and regional airlines has been allowed without having to seek government permission.
Prime Minister Narendra Modi described the easing of FDI norms at 32 investment points as a reflection of "unequivocal and unwavering" commitment of the government to development and reforms as they should touch life of every citizen.
He asserted that the country is "unstoppable" on the path of economic progress and the government wanted the world to see the tremendous opportunities India offers.
The raft of reforms, aimed at boosting investor confidence and drumming up FDI for faster growth, comes ahead of Modi's visit to the UK beginning today.
Talking to reporters, finance minister Arun Jaitley said, "Reform is always an ongoing process, there is no finishing line as far as reforms are concerned.''
Asked whether the FDI reforms would also include multi-brand retail, he said that there is no change in the existing policy for the sector.
As part of the reform exercise, the government has allowed 100 per cent FDI in cable and direct-to-home TV operators, duty free shops and investment through automatic route in limited liability partnerships.
It also permitted portfolio investors to buy up to 74 per cent in local private banks, with full fungibility, while palm, coffee and rubber plantations have been opened up for the first time.
The rules for sourcing for single brand retailers, particularly for high-tech, have been eased by allowing them to sell online without specific permissions. But there is no change in 51 per cent limit for retailers like Walmart in multi-brand retailing.
The government also raised the power of the Foreign Investment Promotion Board (FIPB) to give single-window clearance for investment projects of up to Rs5,000 crore from Rs3,000 crore currently.
"Today's FDI related reforms will touch 15 sectors and benefit (the) youth. Government's commitment to development and reforms is unequivocal and unwavering," Modi tweeted soon after the government made the announcement.
"Today's reforms are another example of emphasis on 'Minimum Government, Maximum Governance'. They will ease, rationalise and simplify processes," he said in another tweet.
Department of Industrial Policy and Promotion (DIPP) secretary Amitabh Kant said, "This is a Diwali gift for investors. This is the biggest big bang reform of the government."
In the defence sector, 49 per cent foreign investment has been allowed under the automatic route and anything beyond through the Foreign Investment Promotion Board (FIPB) approval.
Earlier, the investors were required to take approval of Cabinet Committee on Security for foreign investment above 49 per cent in the defence sector.
"Portfolio investment and investment by Foreign Venture Capital Investor (FVCIs) will be allowed up to permitted automatic route level of 49 per cent," it clarified.
In the broadcasting sector, 100 per cent FDI has been allowed in DTH, teleports, mobile TV and cable networks. Of this, 49 per cent will be allowed under automatic route and beyond that will need FIPB approval.
In the case of terrestrial broadcasting, FM (FM radio) and uplinking of news and current affairs' TV channels, the foreign investment limit has been raised from 26 per cent to 49 per cent under the approval route.
In the private banking sector, the government has introduced full fungibility of foreign investment and accordingly, "FIIs / FPIs / QFIs, following due procedure, can now invest up to sectoral limit of 74 per cent, provided there is no change of control and management of the investee company".
Earlier, portfolio investment was permitted up to 49 per cent.
The government allowed 100 per cent FDI under automatic route in duty-free shops.