Buoyed by the improved rankings in the ‘Ease of Doing Business’ index, the Government of India is mulling further liberalisation for making it more foreign investment friendly.
The latest in this series is the government’s plan to allow 100 per cent FDI for telecom services including infrastructure through the automatic route. Under the automatic route for FDI, no prior government approval is required before the proposed investment and only post-facto intimations are required to be filed with the concerned authorities.
The Telecom Commission (the final decision making body of the Department of Telecom) is likely to discuss this proposal soon.
Currently, up to 100 per cent FDI is allowed in this sector. However, proposals of only up to 49 per cent FDI qualify under the automatic route. Any FDI above 49% in telecom sector requires prior government approval. The rationale offered for this requirement is security reasons.
The move, if approved may bring cheer to this much in-debt sector. The sector is very capital intensive and has a long gestation period as well. Only serious investors will bet their money despite the red carpet laid by the government.
More FDI in this sector may improve the cash flow and sentiment at large.
Bhumesh Verma is a lawyer with over 2 decades of experience in advising domestic and international clients on corporate transactions (M&A, Venture Capital, Private Equity, Startups, corporate advisory, etc.) and features in "The A-List - India's Top 100 Lawyers" by India Business Law Journal. He keeps writing frequently on FDI, M&A and other corporate matters and is a guest faculty as well. He can be reached at firstname.lastname@example.org.