The government's move to relax foreign direct investment (FDI) norms in sectors, including civil aviation, single-brand retail, defence and pharma, will help attract big investments and boost job creation, India Inc said on 20 June.
"Liberalisation of the FDI regulations reflects the government's commitment to reforms and openness, and reassures investors that ease of doing business remains a high priority," Chandrajit Banerjee CII Director General said.
"Taken together, the new FDI rules will attract big new investments across key sectors such as food processing, defence production, pharmaceuticals and civil aviation, among others, thereby adding to growth and employment," Banerjee said.
Other sectors in which FDI norms have been relaxed include e-commerce in food products, broadcasting carriage services, private security agencies and animal husbandry.
Terming the simplification of policy framework governing investments in strategic sectors like defence and aviation as a "huge positive for the economy", Ficci Secretary General A Didar Singh said, "The Modi administration through these moves has once again highlighted that reform is a continuous process in order to capitalise on the potential India offers."
Singh felt that "there is no doubt that India today is the most preferred investment destination in the world. While the attraction of our market is known to all, there is now even more reason for global investors to commit themselves for making and doing business in India".
In the defence sector, foreign investment beyond 49 per cent has been permitted through the approval route in cases resulting in access to modern technology in the country or for other reasons.
The government has done away with the clauses pertaining to the 'state-of-the-art' technology.
Assocham Secretary General DS Rawat said the decision will help in bringing investment and advanced technology into the defence sector, potentially leading to inflow of capital and setting up of entities of original equipment manufacturers (OEMs) and their suppliers through technology transfer.
The earlier policy allowed FDI in the defence sector beyond 49 per cent under the approval route on a case-to-case basis subject to the condition that it would result in access to modern and state-of-the-art technology in the country.
The decision to further liberalise the FDI set-up with the objective of "providing major impetus to employment and job creation in India" was taken at a meeting chaired by Prime Minister Narendra Modi on 20 June.
This is the second major reform overdrive in the FDI space after significant rules relaxations in November 2015.