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The Indian Prime Minister Narendra Modi recently announced a relaxation of India's rules regarding foreign ownership of businesses operating in the country. The announcement comes just days after the resignation of the chairman of the country's central bank and has been seen as an attempt at reassuring international markets.
Previously, no foreign entity could hold more than a 49% stake in a civilian airline company operating in India. Under the new rules, airlines may be owned 100% by an entity outside of India's borders. Defense companies will now also be allowed to be completely foreign-owned, compared to the previous restriction of 74%. In addition, foreign ownership rules have been relaxed for the industries of food production, broadcasting, and pharmaceuticals.
The prime minister was careful when softening its FDI rules on retailers, specifying that the new rules only apply to single brand sellers. This specification restricts companies such as Walmart and Carrefour, a hugely popular French "hypermarket," who are trying to gain a presence in the Indian market. However, it is great news to brands such as Apple and IKEA. These companies see India as their next dream destination with a rising middle-class.
This is just the latest effort from the Indian government to create more market-friendly policies that aim to increase FDI. However, some are doubting the effectiveness of such policy-making without reform of other areas such as labor, land, and education. As one blogger put it, "removing FDI limits, by itself, is not adequate to get the massive investments India needs."
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