India Releases Extensive FDI Reforms For Foreign Investors

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100% FDI now permited in telecommunications

Jul. 17 – Foreign direct investment (FDI) caps in several industries in India were raised this week after the Union Cabinet agreed on changes to spark growth in key sectors. The changes were made after Prime Minister Manmohan Singh stressed the importance of increased foreign investment while chairing a committee of high-level cabinet ministers.

The agreement allows for 49 percent FDI in several sectors, including:

  • Petroleum and natural gas
  • Commodity and stock exchanges
  • Power exchanges
  • Asset reconstruction
  • Single-brand retail
  • Telecommunications

Foreign investment up to 49 percent in these industries may be made under the automatic route, which does not require approval from the Reserve Bank of India or the Indian government. Additionally, several of these sectors are eligible for 100 percent FDI upon approval by the Foreign Investment Promotion Board. These include:

  • Asset reconstruction
  • Single-brand retail
  • Telecommunications

The defense sector will also be eligible for greater FDI under the recent changes. While the standard cap for the sector remains at 26 percent, according to a government press release the Cabinet Committee on Security will be allowed to approve defense projects for up to 100 percent FDI if the projects “are likely to result in access to modern and state of the art technology.”

The measures have been welcomed in India as the country focuses on improving infrastructure and lowering its current account deficit.

“India’s economic reforms continue to take place under Finance Minister Chidambaram, and this latest round of loosening up the Indian market to attract greater foreign investment in these sectors is another step in the right direction for the country,” said Chris Devonshire-Ellis, Managing Partner for India and Singapore of Dezan Shira & Associates. “India needs FDI to assist, modernize and upgrade its national infrastructure, with great opportunities awaiting those investors who will do so.”

Foreign investment into India totaled US$27 billion in 2012 and is expected to grow by 15 percent in 2013, according to the United Nations’ World Investment Report. The report also ranked India as the third most desirable host region for FDI activity in 2013-15.

“India has the similar type of infrastructure development opportunities that China offered 20 years ago. Now is the time for foreign investors to seriously consider India as an investment and corporate development destination,” Mr. Devonshire-Ellis further commented.

Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.

For further details or to contact the firm, please email india@dezshira.com, visit www.dezshira.com, or download the company brochure.

You can stay up to date with the latest business and investment trends across India by subscribing to Asia Briefing’s complimentary update service featuring news, commentary, guides, and multimedia resources.

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