Narendra Modi clears foreign investors’ path, India to gain faster growth
New Delhi, June 21: The Indian government announced sweeping changes on Monday to throw open its economy to foreign investment, providing a new path for global titans like Apple and Ikea to capitalize on the country’s growth, the fastest among the major emerging markets.
The long-awaited rules, instituted through executive order, reinforced the government’s plan to develop more business-friendly policies as the country looks to spur job creation and maintain its momentum. Domestic and international companies have long complained about the difficulty of doing business in India, a factor that has stymied investment and growth.
While the economy is still hampered by the country’s infrastructure deficiencies and sprawling bureaucracy, the changes represent a greater shift away from the socialist and protectionist policies of India’s modern post-independence history. The new rules will allow foreign investors to establish 100 percent ownership in companies involved in defense, civil aviation and food products, although with government approval.
Foreign investors will also be permitted to buy up to 74 percent of Indian pharmaceutical companies without seeking government approval. The government similarly relaxed regulations that had made it difficult for companies like Apple and Ikea to establish retail operations in India.
The election of Prime Minister Narendra Modi in 2014 was widely expected to lead to more market-friendly policies, which he had championed in his years as the chief minister of the state of Gujarat. The delay in bringing them about had led to widespread criticism that Mr. Modi was not moving fast enough to stimulate the economy.
India’s latest reports on job creation may have tipped the scales in favor of further economic liberalization, some experts said. Domestic data showed weak employment numbers in the last quarter of 2015 in jewelry, automobiles and information technology, compared with a year earlier.
The timing of his announcement was almost certainly aimed at reassuring international markets. The rules were rolled out just two days after the surprise resignation of the widely respected chairman of the central bank,Raghuram G. Rajan, whose departure has prompted uncertainty about the government’s reform plans.