India has announced sweeping moves to expand foreign investment in civil aviation, defence, and a string of other sectors as part of attempts to open up the economy.
The government eased restrictions on foreign direct investment (FDI) in nine areas as it looks to spur investment in the world’s second most populous country.
Prime Minister Narendra Modi tweeted that the “radical” changes would make “India the most open economy in the world for FDI” and were aimed at generating jobs for the country’s tens of millions of young people.
Commerce Minister Nirmala Sitharaman said the aim was to make it easier for overseas companies to manufacture in India, notorious for its red tape and labyrinthine regulations.
Under the changes, companies like Apple could move closer to opening stores in India after the government eased regulations on local sourcing.
Overseas companies will in future be allowed to own local airlines outright, compared to a previous 49 per cent cap, with government approval. Investment in building and modernising airports around the country will also be eased.
The cap on foreign investment in defence was raised to 100 per cent from 49 per cent, subject to government approval, in cases which give India access to modern technology.
“These are sectors in which India needs huge amounts of investment and the government’s assessment is that these sectors also need injections of new technology which will lead to productivity gains for the economy,” Devendra Kumar Pant, chief economist at India Ratings & Research in New Delhi, told AFP.
Central bank governor Raghuram Rajan, credited with helping to reform and revive the economy, announced at the weekend he would not seek a second term in September – raising concern among analysts about the government’s commitment to reform.
Modi stormed to power in 2014, promising an overhaul of the faltering economy. Shortly after taking the reins his government raised foreign investment caps in the defence and insurance sectors and for some railway projects.
