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Government allows 100 per cent FDI in defence, civil aviation

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NEW DELHI (PTI/BNS): The Government on Monday relaxed Foreign Direct Investment (FDI) norms in a host of sectors including defence and civil aviation by permitting more investments under automatic route.

"Now most of the sectors would be under automatic approval route, except a small negative list. With these changes, India is now the most open economy in the world for FDI," said an official statement.

The decision to further liberalise FDI regime with the objective of "providing major impetus to employment and job creation in India" was taken at a meeting chaired by Prime Minister Narendra Modi on Monday.

This is the second major reform in the FDI space. The Centre in last November had significantly relaxed the foreign investment regime.

In the defence sector, the policy has been tweaked to allow 100 per cent FDI by doing away with the condition of access to "state of the art" technology. It has now been modified to "modern or for other reasons", a move that will widen the scope of investment by foreign players.

The new norms have also been made applicable to manufacturing of small arms and ammunitions covered under Arms Act 1959.

Earlier policy allowed FDI in defence sector beyond 49 per cent under the approval route on a case-to-case basis subject to the condition that it would result in access to modern and 'state-of-art' technology in the country.

In the civil aviation sector, the Government has allowed 100 per cent foreign investment in "scheduled air transport service/ domestic scheduled passenger airline and regional air transport service".

Under the new regime, 49 per cent would be via automatic route and beyond that limit, government nod would be required.

At present, up to 49 per cent FDI is permitted in scheduled airlines.

"For NRIs, 100 per cent FDI will continue to be allowed under automatic route.

"However, foreign airlines would continue to be allowed to invest in capital of Indian companies operating scheduled and non-scheduled air-transport services up to the limit of 49 per cent of their paid up capital and subject to the laid down conditions in the existing policy," the official statement said.

With a view to aid in modernisation of existing airports to establish a high standard and help ease the pressure on the existing airports, it has been decided to permit 100 per cent FDI under automatic route in brownfield airport projects.

Earlier, FDI in brownfield airport projects beyond 74 per cent was under approval route.

Other sectors in which FDI norms have been relaxed include e-commerce in food products, broadcasting carriage services, private security agencies and animal husbandry.

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