Also Read | Apple, IKEA to benefit as Modi government eases sourcing norms for FDI in single-brand retail
The reason why caution has to be the operative word on FDI policy, needless to say, is the Apple single-brand retail case – Apple is supposed to be another big beneficiary of Monday’s policy since the UPA’s 30% local-sourcing norms didn’t allow Apple to set up its own stores here. Last November, the government came out with rules which said the local-sourcing rules could be relaxed for ‘cutting-edge’ and ‘state-of-the-art’ technology, labels that most would have thought applied to Apple. Yet, when Apple’s application for setting up its own stores came, the government rejected it. So while it is true that Monday’s policy talks of relaxing local sourcing norms for ‘up to three years and a relaxed sourcing regime for another five years’, it still talks of doing this for ‘state-of-the-art’ and ‘cutting edge’ technology – whether Apple will get approved this time around remains an open question and it doesn’t help that there is still no definition of what ‘state-of-the-art’ or ‘cutting edge’ technology are.
Also Read | 100% FDI in defence norms eased by Modi government: Analysts give thumbs up; here’s what it means for the sector
In the defence sector, the new norms allow FDI beyond 49% in case there it provides ‘modern technology’ or ‘for other reasons to be recorded’ – this was allowed under the earlier policy only for ‘state-of-the-art’ technology which has now been done away with. Theoretically, this means 100% FDI can be allowed on grounds it will create more employment. Similarly, while foreigners can only take over existing pharmaceuticals firms after government permission – this was done after a few Indian firms like Ranbaxy were bought by foreigners – the new policy allows 74% FDI under the automatic route and by government approval after that. The policy will be tested if, for instance, foreign firms buy 74% of a Bharat Biotech and Serum Institute which produce the bulk of vaccines in India and, say, hike prices. The proof of the pudding, as the old saw goes, is in the eating.