Modi eases rules for foreign investors as growth slows

NEW DELHI • Indian Prime Minister Narendra Modi yesterday eased restrictions on foreign direct investment across several sectors, including allowing overseas airlines to invest in state carrier Air India, in a bid to revive growth in the country.

Foreign carriers can buy up to 49 per cent in the loss-making national airline, the government said.

In a move aimed at further improving ease of doing business, the Cabinet also allowed single-brand retailers to start local operations without federal approval and foreigners to own up to 100 per cent of real estate brokerages.

Mr Modi is trying to lure foreign capital to revive economic growth, expanding at the slowest pace since he came to power in 2014.

The sale of Air India will be one of the key reforms in recent years as the airline is struggling with a debt load of US$7.6 billion (S$10.1 billion) and is surviving on a taxpayer bailout.

"By increasing the limits, you are sending out a signal that you are moving in the direction of opening up the Indian economy to foreign investment," said chief economist Madan Sabnavis at Care Ratings.

Foreign direct investment into India rose 17 per cent in the April to September period to US$21 billion from a year ago, according to data from the Commerce Ministry.

Since coming to power, Mr Modi has relaxed rules on investment in defence, construction, insurance, pension and other sectors, resulting in the highest foreign investment inflows in the year ended March 2017.

Japan's Fast Retailing, operator of the Uniqlo casual-wear brand, could benefit from the change in rules. The clothing chain had submitted an application in November seeking approval to do business in the country under the Uniqlo brand.

The easing of rules for Air India would allow foreign airlines to buy a minority stake in a carrier with a fleet of about 150 planes, and landing and parking slots at lucrative airports from London to New York.

Only IndiGo, India's biggest carrier which is operated by InterGlobe Aviation, has expressed interest in Air India so far.

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A version of this article appeared in the print edition of The Straits Times on January 11, 2018, with the headline 'Modi eases rules for foreign investors as growth slows'. Print Edition | Subscribe