India is set to make further changes in its overseas investment regime, scrapping the need for approvals in sectors where licences are also required, such as defence, telecom and broadcasting, eliminating one layer completely from the process. Under current rules, investors have to apply for licences in many sectors besides clearances from multiple ministries, including security from home affairs. After securing licences, they are required to apply for approval of foreign investment, if any, which again goes through an inter-ministerial clearance process.
Up to 100% FDI is allowed in defence on a case-to-case basis. India is the world’s biggest importer of defence goods, accounting for 13% of global purchases during 2012-16. The government is looking to give a push to domestic manufacturing of defence equipment to reduce imports and also create more local jobs. In the case of telecom too, 100% FDI is allowed but subject to licensing by the Department of Telecommunications. Similarly, broadcasting is subject to rules and conditions framed by the ministry of information and broadcasting. The government has already announced its intent to scrap the Foreign Investment Promotion Board (FIPB) and leave FDI clearance to the relevant ministries or departments in sectors where government approval is needed. Keen to attract foreign funds in the country, the government has put a number of sectors on the automatic route.