BACKGROUND
Monday morning June 20, 2016, people woke up to the news of Mr. Raghuram Rajan returning to academia after his term as the RBI Governor ends. Before the Indian markets could react to this news, by mid-day, the scenario changed as the Indian Government announced its decision to bring about sweeping changes to the Foreign Direct Investment ("FDI") Policy.
The FDI Policy has been further liberalized thereby providing an extremely favourable environment for a further impetus to increased foreign direct investment into the country. This will result in the creation of more job opportunities and increasing overall competitiveness in the economy ultimately leading to tremendous growth opportunities. As stated in the Press Release of June 20, 2016 by which the said liberalisations have been issued, India now stands as the most liberalized country for foreign investment in the world. A number of sectors have been thrown open for foreign investment either under the 100% automatic route or few sensitive sectors thrown open partially under the automatic route. This is second major overhaul after the last set of liberalisations of November 2015 which witnessed reforms in a number of sectors such as tea sector, coffee plantations, Limited Liability Partnership, Defence, Cable networks, Broadcasting, Air transport service, Construction development projects, Single Brand Product Retail Trading, Duty Free Shops, etc.
The Press Release of June 20, 2016 has paved way for the following changes which have been set out in brief:
Sr. No. | SECTOR | NOW |
1. | Food Products manufactured/produced in India |
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2. | Defence Sector |
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3. | Broadcasting Carriage Services |
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4. | Pharmaceuticals |
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5. | Civil Aviation Sector |
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6. | Private Security Agency |
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7. | Establishment of branch office, liaison office or project office |
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8. | Animal Husbandry |
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9/ | Single Brand Retail Trading |
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OUR VIEW
As can be seen from the Press Release, the FDI policy has been further progressively overhauled and a new wave of reforms have been ushered in. While the fine print of these relaxations which will be set out in the Press Note, will have to be awaited, these liberalisations are expected to have a significant impact on the sectors so liberalised including pharmaceuticals which may see heightened levels of M&A activity as also the recognition of a new sector of food manufacturing and food production.
Please look out for our next "Intra Legem" which will be providing an over-arching view of FDI in the pharma sector.
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