FDI in India’s Aviation Sector May Be Increased

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Nov. 24 – The Indian government has indicated that it will move speedily to save the country’s deteriorating aviation industry by liberalizing rules on foreign investment. A draft cabinet note on foreign direct investment has put the FDI cap for foreign airlines at 26 percent against 24 percent planned originally by the Civil Aviation Ministry to the Department of Industrial Policy and Promotion.

Presently, foreign direct investment up to 49 percent is permissible in the aviation sector, but foreign airlines are not permissible to invest in a domestic airline company. The cabinet note said that the existing restrictions need to be removed.

The cabinet note favors foreign airlines to invest in domestic airlines and agrees that any strategic investor would be interested in a minimum 26 percent investment. The note was sent to government departments on November 17, seeking comments from the Ministry of External Affairs, Civil Aviation Ministry and the Department of Economic Affairs. These departments are likely to respond within 15 days.

The government also intends to reorganize the state-owned Air India and bring in a strategic partner when it turns profitable.

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