New Delhi: Hours after Raghuram Rajan said he will not seek a second term as Reserve Bank chief, the government on Monday eased foreign direct investment (FDI) norms in pharma, aviation and defence sectors in what is being called a major reform move.
The decision to relax FDI norms in key sectors is seen as a bid to calm foreign investors, rattled by the exit of Dr Rajan, analysts say. Under the new norms, 74 per cent FDI would be allowed in pharma sector under the automatic route, which means that investors will not need government’s approval to invest up to 74 per cent in existing companies. Currently, FDI up to 100 per cent is permitted in new projects in the pharmaceutical sector.
The government also allowed 100 per cent FDI in scheduled airlines. Foreign airlines are currently allowed to own only 49 per cent in a local airline. The decision to relax FDI norms in aviation space led to a sharp rally in listed carriers such as SpiceJet, Jet Airways and InterGlobe Aviation.
In the crucial defence sector, foreign companies can own 100 per cent equity, according to the latest rules. The government had last year relaxed FDI norms in about dozen sectors, a move that helped FDI flows to hit an all-time high of $40 billion in 2015-16.
The decision to ease FDI norms was taken at a high-level meeting chaired by Prime Minister Narendra Modi today.