We reported on the 20 February 2016 regarding the Indian government’s decision to reverse retrospective tax on foreign funds. It has long been the case that some foreign companies are reluctant to invest in India due to its unpredictable tax regime, but the government seems to be sticking to its promise to change this.
On the 20 July 2016 reforms were announced with regards to rules on foreign direct investment (FDI) in pharma, aviation, food processing and defence sectors.
Key highlights include:-
Up to 100% FDI in defence sector
- Up to 74% FDI in Brownfield Pharmaceuticals under automatic route
- 100% FDI in Brownfield airport project under automatic route
- FDI up to 49% in civil aviation under automatic route, beyond 49% through government approval
- 100% FDI under automatic route for cable networks, DTH and mobile TV
- 100% FDI under government route for trading of food products manufactured or produced in India, including those traded online
A three year relaxation with a possible extension to five years on local sourcing requirements has also been announced. Previously 30% of products sold had to be sourced from within India to encourage local manufacturing.
The Indian Prime Minister has hailed the reforms as making India the most open economy in the World for FDI.