India allows 100% foreign investment in aviation sector

Investment up to 49 per cent will be allowed under the automatic route, according to a government statement.

MUMBAI // India on Monday opened up its civil aviation sector to allow 100 per cent foreign direct investment, amid a major overhaul in which it relaxed rules on overseas investment into several industries.

The FDI limit on Indian carriers had been capped at 49 per cent.

India also allowed 100 per cent FDI in its defence sector and eased rules on overseas investment in sectors including food products, broadcasting and pharmaceuticals.

India’s aim is to attract more flows of investment from overseas and boost job creation in the country.

“Clearly this is a very positive move for foreign investors looking to invest in India, with a more liberalised regime,” said Abhimanyu Sofat, a cofounder of AdviseSure, an investment advisory company in India.

Etihad Airways bought a 24 per cent stake in the Mumbai-based Jet Airways in 2013 for US$379 million, after India opened up the aviation sector to FDI of up to 49 per cent in 2012.

India on Monday kept this cap for foreign carriers in place, meaning that while it will allow overseas investors to fully own an Indian airline, foreign airlines will not be able to increase their ownership beyond 49 per cent.

India last week launched a new aviation policy, making it easier for India’s carriers to fly abroad. “Simplification in the policy framework governing investments … is a huge positive for the economy,” said A Didar Singh, the secretary general of the Federation of Indian Chambers of Commerce and Industry.

The government said that the changes mean that “India is now the most open economy in the world for FDI”. It said: “Amendments to the FDI policy are meant to liberalise and simplify the FDI policy so as to provide ease of doing business in the country leading to larger FDI inflows contributing to growth of investment, incomes and employment.”

The government has introduced reforms over the past two years in sectors including broadcasting, pensions and defence in an effort to attract more foreign investment.

FDI inflows into India reached a record $55.4 billion in financial year from April last year to March, up from $36bn during the previous financial year, according to government data.

Narendra Modi, the prime minister, has conducted a series of high-profile trips to countries including the UAE, which took place in August, and the UK, the United States and Japan, among others, partly with the aim of attracting more investment from abroad into India.

“While the attraction of our market is known to all, there is now even more reason for global investors to commit themselves for making and doing business in India,” said Mr Singh.

Mr Sofat said that while the new rules certainly made India one of the more liberal countries for FDI at a policy level, on the ground that would not in itself necessarily translate to making it an easier place for foreign companies to do business.

“The challenges remain in terms of execution,” he said. “The problem is the kind of regulatory clearances you require and so on.”

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