Asset Castle Investments Follows India Closely As It Announces Sweeping Foreign Investment Reforms

This week on Monday India announced a sweeping relaxation of foreign direct investment rules in civil aviation, defence and a string of other sectors as part of efforts to open up the economy.

The government freed up nine areas of the economy, including allowing foreign companies to wholly own local airlines as it looks to spur investment in the world’s second most populous country.

Prime Minister Narendra Modi tweeted that the “radical” changes would make “India the most open economy in the world for FDI” and were aimed at generating jobs for the country’s tens of millions of young people.

Commerce Minister Nirmala Sitharaman said the changes were focused on making it easier for overseas companies to manufacture in India, notorious for its red tape and labyrinthine regulations.

Under the changes, companies like Apple could move closer to opening stores in India after the government eased regulations on local sourcing.

Overseas companies will in future be allowed to own local airlines outright, compared to a previous 49 percent cap, with government approval.

Investment in building and modernizing airports around the country will also be eased.

The cap on investment in defence was raised to 100 percent from 49 percent, subject to government approval in cases which give India access to modern technology.

The Changes come after popular central bank governor Raghuram Rajan announced at the weekend that he would not seek a second term from September.

Rajan is credited with helping to reform and revive the economy and his announcement raised concerns among analysts about government’s commitment to reform.

Modi stormed to power in 2014, promising an overhaul of the faltering economy. Shortly after taking the reins his government raised forein investment caps in the defence and insurance sectors and for some railway projects.

Growth is now chugging along at 7.9 percent, the fastest of any major economy.

But the government has been criticized for failing to implement major reforms to boost investment and help create jobs.

The announcement came after Modi chaired a meeting of his top officials Monday, looking to increase foreign investment from the 55.46 billion dollars reached last financial year.

Apple last month hit a roadblock in its plans after the government ruled it must buy at least 30 percent of its parts locally if it wants to open stores in India.

Single-brand foreign retailers can now operate stores for three years before having to comply with local sourcing rules and for five years if they can prove their products are “cutting edge” or “state-of-the-art”.

The changes to defence come after Modi vowed to end India’s status as the world’s number one defence importer. He wants 70 percent of hardware to be manufactured domestically by the turn of the decade.

India’s aviation sector has undergone rapid transformation since a liberalisation drive began in 2003, but most people still travel the vast country by rail and road.

The government wants India to become the world’s third largest civil aviation market by 2022.

With these new relaxed reforms India will continue to grow their economy and the increasing foreign investment will make their economy solid for the future stated investment analyst Ben Groves for Asset Castle Investments.

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This release was published on openPR.