Indian Government Relaxes FDI Norms In Aviation Sector

In a major step aimed at boosting the Indian civil aviation sector, the Cabinet Committee of Economic Affairs relaxed the Foreign Direct Investment norms in aviation which will allow foreign aviation companies to invest in Indian aviation companies.

New Delhi (I-Newswire) September 14, 2012 - In a major step aimed at boosting the Indian civil aviation sector, the Cabinet Committee of Economic Affairs relaxed the Foreign Direct Investment (FDI) norms in aviation which will allow foreign aviation companies to invest in Indian aviation companies.

So far, foreign investors were allowed to have up to 49 per cent stake in domestic airline companies subject to the fact that the investor is in no way related to the aviation business. However, after the decision announced today foreign carriers can pick up to 49 per cent stake in domestic Indian aviation companies.

The new FDI norms are expected to provide the much-needed cash flow to domestic carriers. At the same time, it is expected that this policy will result in improvement in technology on both fronts – ground handling and flight operations. Experts are also of the view that international players will bring best international management practices in the domestic sector.

While competition in the industry will increase due to this policy in the coming times, it will result in making the sector more competitive and proactive in terms of consumer service. Passengers can expect better international connectivity and far better service at competitive fares in times to come. In other words, the new FDI norms in the aviation sector provide more power to the consumer.

As far as the domestic airlines are concerned, it is expected that the foreign airlines will create access to capital. With India being a very lucrative market for most of the foreign airlines, it is believed that this policy will revolutionise the sector in the long run. For the record, India is still an under-served market as far as the aviation sector is concerned and there are huge opportunities available for growth in terms of air traffic in the country.

The Foreign carriers have welcomed the move. It is worth mentioning here that the policy announcements in the areas of aviation, retail and broadcasting follow after the hike in diesel prices was announced on Thursday. Strategic reforms by the government are expected to boost the investor sentiment in the economy.