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Eversheds comment: Devil in the detail on proposed new India investment conditions

  • United Kingdom

    17-07-2013

    Commenting on news that India is relaxing regulations to encourage foreign investment, Parmjit Singh, partner and India trade expert at global law firm Eversheds, says:

    "The news that the Indian Government has raised the FDI cap in key sectors is very much to be welcomed. The Indian Government has been keen to gain momentum for foreign investment into India for the last 18 months, ever since it announced retrospective tax changes that led to a significant decline in foreign investment. Last year it announced a number of key rules allowing investment into the retail sector and now it has announced more rules changes. The most significant are those allowing 49% investment into the insurance sector under the automatic route and FDI greater than 26% into the defence sector for cases that will help India acquire "state of the art" technology (subject to getting clearance from the Cabinet Committee on Security). The latter is the most significant since international defence companies have been reluctant to invest into India while only 26% investment was allowed into the defence sector. As always, much will depend on the detail behind these announcements today. If the conditions for investment are too restrictive then we may see the same problems encountered in retail where major global retailers have yet to commit to significant investment."

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