Government notified changes in FDI Policy, 2016

On 24th June, 2016, the Government of India has notified certain changes in the extant policy on foreign direct investment (FDI) vide issuance of Press Note 5 (2016 series) by the Department of Industrial Policy & Promotion (DIPP), Ministry of Commerce & Industry.

The Government has notified several changes in the extant FDI Policy for sectors including pharmaceuticals, defence and single-brand retail with a view to make India more investor friendly and an attractive FDI destination.

The various changes notified in the FDI policy (w.e.f. 24th June, 2016) are as under:

1. RBI approval is not required for establishment of branch office, liaison office or project office or any other place of business in India if the principal business of the applicant is defence, telecom, private security or information and broadcasting, where approval of the Foreign Investment and Promotion Board (FIPB) or license/permission by the concerned ministry/regulator has already been obtained.
2. For receipt of 100% FDI under automatic route in the animal husbandry (including breeding of dogs), pisciculture and aquaculture, the prescribed controlled conditions will not be applicable. In addition, the controlled conditions have been revised for receipt of 100% FDI under automatic route in floriculture, horticulture, apiculture and cultivation of vegetables & mushrooms, development and production of seeds and planting material and services related to agro and allied sectors.
3. A manufacturer is permitted to sell its products manufactured in India through wholesale and/or retail, including e-commerce without government approval.
4. 100% FDI under Government approval route is allowed for trading, including through e-commerce, in respect of food products manufactured and/or produced in India. Application for FDI in food products retail trading will be processed in DIPP before being considered by the Government for approval.
5. For receipt of FDI in the defence sector, the mandatory condition of access to ‘state-of-art’ technology has been done away with. It has now been provided that the Government may allow FDI in defence beyond 49% wherever it is likely to result in access to modern technology or for other reasons to be recorded.
6. 100% FDI has now been permitted under automatic route in teleports, direct to home, cable networks, mobile TV, headend-in-the sky broadcasting service and cable networks, as against 49% till now.
7. 100% FDI in existing airport projects is to be allowed without government permission, from 74% permitted till now.
8. 100% FDI is now permitted in scheduled air transport service/ domestic scheduled passenger airline and regional air transport service. 49% FDI is permitted under automatic route (automatic upto 100% for non-resident Indians), and Government approval will be required for receipt of beyond 49%.
9. 74% FDI is now permitted in private security agencies, 49% under automatic route, and Government approval will be required to be sought for receipt of FDI beyond 49% and upto 74%.
10. For receipt of FDI in single brand retail trading beyond 51%, sourcing norms will not be applicable up to three years from commencement of the business i.e. opening of the first store for entities undertaking single brand retail trading of products having state of art and cutting edge technology and where local souring is not possible.
11. 74% FDI have now been permitted, subject to prescribed condition, under automatic route in existing pharmaceutical ventures i.e. for brownfield investments. For receipt of FDI beyond 74% and upto 100%, Government approval will be required.