India Relaxes Foreign Direct Investment Rules
21 June 2016 - 1:33AM
Dow Jones News
By Rajesh Roy and Newley Purnell
NEW DELHI -- India's government on Monday eased foreign-direct
investment restrictions in several sectors to increase inflows, a
move that could also pave the way for Apple Inc. to open its own
stores in one of its main growth markets.
The policy changes relax foreign direct investment thresholds in
the retail, defense and civil-aviation sectors among others. Prime
Minister Narendra Modi tweeted that "the move would provide a major
impetus to job creation and infrastructure" and make India the most
open economy in the world for foreign investment.
The move signaled the government was pushing ahead with its
effort to liberalize its economy and came just two days after
India's central bank Governor Raghuram Rajan announced that he
would step down when his term ends in September. The news briefly
rattled Indian markets on Monday but shares quickly brushed it off,
helped by the government's announcement.
As part of the changes, the government said foreign-owned
single-brand retailers would have a three-year grace period from
complying with local-sourcing requirements that demand they buy at
least 30% of their manufacturing materials from Indian vendors.
After that, the rules for retailers offering "state-of-the-art" or
"cutting-edge" technology would be relaxed for another five
years.
Apple in January said it had sought government permission to
open its own stores in India. It now sells its devices through a
network of Indian-owned distribution companies and retailers.
India's minister for commerce and industry Nirmala Sitharaman
said last month she supported waiving the local-sourcing rules that
could have blocked Apple's plan for stores. Earlier in May, India's
finance ministry rejected the same recommendation from a government
panel, two officials said.
An Apple spokeswoman didn't respond to requests for comment
Monday.
Since assuming office in May 2014, Prime Minister Narendra
Modi's government has moved to relax investment rules, helping the
country emerge as one of the top destinations for foreign
money.
India reported a 29% jump in foreign direct investment inflows
to $40.46 billion in the fiscal year ended in March, compared with
$30.93 billion in 2014-15, according to data from the trade
ministry.
Ms. Sitharaman said the policy change may mean that Apple would
have to resubmit its single-brand retailing proposal.
India is set to overtake the U.S. as the world's second-biggest
smartphone market after China. Having its own stores in India would
help with Apple's branding in India, analysts say, since it still
has less than 3% market share for smartphones there and faces stiff
competition from low-cost smartphone makers.
Apple stores in India would "attract a lot of people from
various walks of life," said Jayanth Kolla, founder of research
firm Convergence Catalyst. Such stores would also likely display
all of Apple's products, while many consumers may only be familiar
with iPhones, he said.
Apple Chief Executive Tim Cook made a high-profile visit to
India in May, meeting with Prime Minister Narendra Modi to discuss
his company's manufacturing and retailing plans. During his visit,
Apple announced the opening of two new offices in the country to
encourage mapping and mobile app development.
Price is an obstacle for Apple in India. Some 70% of smartphones
sold there last year cost less than $150, while Apple's new iPhone
SE, its least-expensive new iPhone, typically costs more than $500
in the country.
Among the other policy changes announced Monday, the government
allowed foreign investors to own up 100% of domestic airlines,
raising the limit from 49%. It didn't tinker with the current
ceiling of 49% for foreign airlines to invest in domestic
carriers.
It also removed a condition that foreign companies must bring
state-of-the-art technology for investments of over 49% in the
defense sector. With the latest change, foreign investors will be
permitted to own up to 100% of local defense ventures after
obtaining government approval.
New Delhi also permitted foreign companies to own up to 74% in
"brownfield" pharmaceuticals projects without prior government
approval, but proposals for 100% foreign direct investment will
still be scrutinized by the government.
It also raised the foreign direct investment limits in
broadcasting carriage services, including mobile television, cable
networks and direct-to-home services, to 100% from the present
74%.
Write to Rajesh Roy at rajesh.roy@wsj.com and Newley Purnell at
newley.purnell @wsj.com
(END) Dow Jones Newswires
June 20, 2016 11:18 ET (15:18 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
Apple (NASDAQ:AAPL)
Historical Stock Chart
From Apr 2024 to May 2024
Apple (NASDAQ:AAPL)
Historical Stock Chart
From May 2023 to May 2024