Govt announces new FDI rules, opens defence, civil aviation and pharma

The government on Monday radically liberalized the FDI policy with the objective of boosting employment in the country. The decision was taken at a high-level meeting chaired by Prime Minister Narendra Modi.

Following these changes, the country will become the most open economy in the world for FDI. Most of the sectors would be under automatic approval route, barring a small negative list, a government release said.

According to the official statement, this is the second major reform after the last radical changes announced in November 2015.

In a move to further liberalize FDI regime, the government has decided to increase sectoral caps and brought more activities under automatic route to encourage foreign investment.

According to the government release, these amendments seek to further simplify the regulations governing FDI in the country and make India an attractive destination for foreign investors.

As per new rules, 100 per cent FDI has been allowed under government approval route for trading, including through e-commerce, in respect of food products manufactured or produced in India.

In Defence sector, the government has done away with the condition of access to 'state-of-art' technology. Also, FDI limit for defence sector has also been made applicable to Manufacturing of Small Arms and Ammunitions covered under Arms Act 1959.

In pharma sector, the government has decided to permit up to 74% FDI under automatic route in brownfield pharmaceuticals and government approval route beyond 74% will continue.

In civil aviation sector, the government has decided to permit 100% FDI under automatic route in Brownfield Airport projects.