India now most open economy in world for FDI: Narendra Modi

New Delhi,REUTERS: Prime Minister Narendra Modi hailed a sweeping liberalisation of rules on foreign direct investment on Monday, saying they would make Asia’s third-largest economy the most open in the world.

Prime Minister Narendra Modi (Photo: PTI)

“Key reform decisions were taken at a high level meeting chaired by the PM, which makes India the most open economy in the world for FDI,” Modi said in a tweet.

PMO India ✔ @PMOIndia
Key reform decisions were taken at a high level meeting chaired by the PM, which makes India the most open economy in the world for FDI.
3:02 PM – 20 Jun 2016
474 474 Retweets 964 964 likes
In a second tweet, he said the changes would provide a “major impetus to employment and job creation in India.”

PMO India ✔ @PMOIndia
Centre has radically liberalized the FDI regime, with the objective of providing major impetus to employment and job creation in India.
3:03 PM – 20 Jun 2016
379 379 Retweets 820 820 likes
PMO India ✔ @PMOIndia
India has been rated as Number 1 FDI Investment Destination by several International Agencies. #TransformingIndia
3:06 PM – 20 Jun 2016
465 465 Retweets 907 907 likes
The government on Monday announced sweeping reforms to rules on foreign direct investment, opening up its defence and civil aviation sectors to complete outside ownership and clearing the way for Apple (AAPL.O) to open stores in the country.

The reforms also loosen restrictions on inbound investments in pharmaceuticals and retail.

Apple is expected to be a beneficiary of a three-year relaxation India is introducing on local sourcing norms with an extension of up to five years possible if it can be proven that products are “state of the art”.

Read: Govt okays 100% FDI in defence, aviation to calm investors after Rexit

Other single-brand retailers like furniture giant IKEA are also expected to benefit.

Defence contractors that have been reluctant to transfer technology to manufacture equipment in India would get the right to own local operations outright, up from 49 percent previously.

In other changes, India allowed 100 percent foreign direct investment (FDI) in civil aviation, following on from last week’s launch of a new policy that lowered barriers to entry for airlines that want to fly international routes.

Read: Government allows 100 per cent foreign direct investment in airlines

The government also allowed foreign companies to own up to 74 percent in ‘brownfield’ pharmaceuticals projects without prior government approval. India already allows 100 percent ownership of greenfield pharma businesses.

The reforms announcement comes two days after India’s central bank governor Raghuram Rajan, feted by foreign investors, announced he would not be available for reappointment when his term expires in September.

Rajan’s decision, whose reforms have been credited for much of the economy’s success in recent years, came as a jolt to the country’s financial markets. The rupee fell to a near one-month low and bonds weakened on Monday.

The last time Prime Minister Narendra Modi’s two-year-old government announced a loosening of FDI norms was after his nationalist political party suffered a heavy defeat in a state election last year.