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India FDI Developments: Budget 2019

18 July 2019
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A key summary by Babita Ambekar, Head of India: Corporate at DWF, on the latest proposals raised by Indian Finance Minister, Nirmala Sitharaman, with respect to the further opening up of select industry sectors to additional foreign direct investment.

Following a landslide election victory by the Modi government, the Indian Finance Minister, Nirmala Sitharaman, announced a slew of new measures in her 2019 budget to attract further foreign direct investment ("FDI") to the Indian market.

Key proposals include the examining of steps to:

raise the FDI limit in the aviation sector above 49%, with India to also enter into aircraft financing and leasing activities;
further open up FDI in the insurance sector from its current limit of 49%, including potentially raising the FDI limit to 100% for insurance intermediaries;
raise the FDI limit in the media sector;
review the local sourcing norms, which currently require single brand retailers to source 30% of their products / components locally;
increase the scope of investment for foreign portfolio investors ("FPIs") and streamline compliance vetting and other regulatory aspects in relation to FPIs.

The timeline for consideration of these proposals has not yet been set and there will likely be wider input sought prior to the implementation of any new policies in this regard. The review of local sourcing norms has however been reiterated by Commerce and Industry Minister, Piyush Goyal, since the budget 2019 announcement and therefore it is clear that reform is very much on the cards.

More broadly, the 2019 budget announcement reiterated that India's key focus will remain the development of infrastructure, including road, ports, utilities, housing, the advancement of agricultural innovation, the provision of further support to build the micro, small and medium enterprise segment as well as the incorporation of new technologies such as electric mobility solutions. It remains clear that significant opportunity exists across a wide range of sectors as the Indian economy continues to open up its doors to foreign participation. Tax concessions for foreign companies establishing in India has been alluded to. Additionally, the proposed streamlining of labour laws is expected to address the complexity of talent management for multinationals when contemplating local expansion.

From a market entry perspective, in recent years, significant steps have been made to ease investment in the Indian market. These include the more evident measures to increase FDI limits, build special economic zones and investor friendly communities, encourage state government-led investor roadshows, implement a unified goods and services tax and streamline business visa processes.

DWF helps connect global businesses to India and Indian businesses to the world. We advise on new market entry, mergers & acquisitions, private equity, inbound/outbound structuring as well as ancillary regulatory and employment matters across a broad range of sectors, including financial services, retail & hospitality, insurance, energy & resources, healthcare and technology. Our further updates will include analysis of FDI developments in key sectors as well as perspectives with respect to regulatory reform.


If you would like any further information or wish to discuss a specific legal issue please contact Babita:

    Contact Babita

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