India Announces ‘Big Bang’ Economic Reforms – Allows FDI in Multi-Brand Retail and Aviation

24 September 2012
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  • After months of policy paralysis, the Indian government on September 20, 2012, notified major reforms permitting and/or increasing foreign direct investment (“FDI”) in the areas of multi-brand retail, civil aviation, broadcasting and power trading exchanges with a view to boost economic growth. The government also gave a nod to disinvest its holdings from certain public-sector undertakings.
  • Up to 51% FDI in multi-brand retail trading has been permitted with prior government approval, paving the way for foreign supermarket and other retail chains to enter India. However, retail sales outlets can only be set up in Indian states that have agreed or agree in future to allow FDI in the sector.
  • Foreign airlines will be permitted to invest up to 49% of the paid-up capital of Indian companies operating scheduled and non-scheduled air transport services with prior government approval.
  • The Indian government has hiked the cap on FDI in the broadcasting carriage sector (direct to home, cable networks, teleports and headend-in-the-sky broadcasting service) from 49% to 74% where investment up to 49% would be under the automatic route and investments beyond 49% and up to 74% will require prior government approval route.
  • Foreign investment up to 49% (with an FDI limit of 26% and FII investment limit of 23% of the paid-up capital) has been permitted in power trading exchanges registered under the Central Electricity Regulatory Commission (Power Market) Regulations, 2010. ‬