India encourages foreign investment by loosening FDI rules

In an attempt to attract more foreign funds to boost the nation’s businesses, India’s government this week relaxed the rules regulating the amount of foreign direct investment (FDI) allowed across a wide spectrum of Indian business sectors, including the aviation industry.

Under the new rules, India will now allow non-airline companies to own up to 100 percent of the shares of Indian air carriers. The previous limit had been 49 percent. Those non-airline investors seeking more than 49 percent, however, must negotiate a formal approval of the transaction from the Indian government. The limit of FDI for foreign airlines in India-based domestic carriers remains the same, at 49 percent.

The rules also were changed to allow FDI of 100 percent in Indian brownfield airports, which was was already the case for greenfield sites.

Other areas outside the aviation sector affected by the relaxed FDI changes include food retail, private, broadcasting carriage services and animal husbandry. According to the Times of India, the government also made it possible for high-tech firms, such as Apple, to open their own stores in India by exempting them from local sourcing requirements for three years under the single-brand retail segment.

The new changes to foreign investment policy make India, “the most open economy in the world for FDI,” according to a statement released by the Indian government. Prime Minister Narendra Modi said the decision to liberalize the FDI standards was to “major impetus to employment and job creation in India.”