UCF Global Perspectives

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India Reduces Foreign Ownership Rules

Casey Field, Intern, Global Economy

June 28, 2016

On Monday June 20, 2016, the Indian government announced plans to reduce foreign ownership rules (AP). Prime Minister Narendra Modi stated, “India is the most open economy in the world for foreign direct investment (Times of India).” The country’s leaders explained that an increase in the opportunity for foreign investment will strengthen job creation and employment (Reuters). Companies like Apple and IKEA will benefit from having access to India’s middle class and the “next big market” (BBC). The new relaxed policies also allow aviation and defense industries to be fully foreign owned (AP). Pharmaceutical and food companies will benefit from the move away from the traditional bureaucracy and limitations that hinder direct foreign investment in India (AP).

In order to create opportunity for Indian nationals and protect small business owners, India requires retailers to source 30% of their products locally (BBC). If companies prove to provide innovative technology, they are able to avoid local sourcing rules for up to 8 years (Reuters). Prime Minister Modi created this FDI-regulation reform after coming into office two years ago, traveling internationally and meeting with key stakeholders such as Tim Cook, CEO of Apple (BBC). It was one of two reforms created to repair the economy and contribute to India’s economic growth (AP). Central Bank Governor Raghuram Rajan’s announcement to not remain another term, due to political conflicts, may contribute to increased investor and multinational confidence in India (Reuters).

 

Sources:

http://www.bbc.com/news/business-36575755

http://www.reuters.com/article/us-india-fdi-idUSKCN0Z60X8

http://bigstory.ap.org/article/aac4aeba3e3841a89ef70fec4c78bec5/india-announces-easing-foreign-direct-investment-rules

http://timesofindia.indiatimes.com/city/delhi/FDI-reforms-PM-says-India-most-open-economy/articleshow/52836286.cms


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