The Government of India on 21 June 2016 took a great step towards making India the most open economy in the world. Through this reform, the government has allowed 100% Foreign Direct Investment (FDI) in food retail, pharmaceuticals, startups, and 74% in the private security agency. Earlier this week the decision was made by the government of India to make the country an attractive Foreign Direct Investment (FDI). This decision will be in effect immediately as stated by the Department Of Industrial Policy & Promotion (DIPP).
The policy now includes 100% Foreign Direct Investment (FDI) under the route for trading approved by the government, with respect to the food products manufactured or produced in India.
This step comes at the time when Indian star-up are experiencing a great heat in the season of the past few years. The government is aware that the current funding is a limited source that will vanish in the future if no necessary step is taken as early as possible. Change FDI Reforms
At the starting of this year, Morgan Stanley reduced the valuation of India’s biggest unicorn, Flipkart, from $15.2 billion to $11 billion. Data shows that in the first quarters of 2016, compared to the same period in 2015, the number of venture capital deals has fallen from 138 to 88, and the total value of venture capital investment has taken a drastic fall of over 80 %, from $1.8 billion to $334 million. According to Sudhir Sethi, chairman of IDG Ventures, “The sentiment is cautious.”
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The main reason for these cautions is the bad global economy, slowdown in China, and many other factors. Even due to slow down in China the Indian startups are attracting investors from china too at large scale to come and invest here in India, even the star-up are also accounting the government as the no of jobs have increased due to the entrepreneurs which are also benefiting the government directly or indirectly.
The government is doing everything possible in their hand to attract the investors as in the sector of defense, the condition of ‘state-of-art’ technology has been removed, legalizing foreign investment in manufacturing of small arms and ammunition in the country. The government has also granted 100 % Foreign Direct Investment (FDI) through the route in broadcasting services like mobile TV, direct to home. Change FDI Reforms
A significant move has been made in allowing 100 percent Foreign Direct Investment (FDI) in airlines and has relaxed the barometers for overseas investments in brownfield airports. Even in the private security agencies FDI limit earlier which was 49 % was raised to 74%. Change FDI Reforms
Even the single-brand retail trading, the mandatory local sourcing norm which prevailed for foreign firms “will not be applicable now for up to three years from the commencement of the business that means the opening of the first store for entities undertaking a single-brand retail trading of products have strict ‘updating’ and ‘leading-edge’ automation where local sourcing is not possible”.
As the immunity period is completed, the foreign investor in the next five years will have to meet the domestic sourcing norm at an annualized average rate of 30 %. Thereafter, they have to comply with the norm on a yearly basis.
The DIPP also announced the changes in medicinal, in which the government has allowed FDI up to 74 % through automatic route and beyond that under the approval of the government.
The government has also laid back the norms in the animal husbandry sector. FDI into the country grew by 29 % to USD 40 billion in 2015-16.