Reforms redux: a welcome signal

The announcement of reforms in >foreign direct investment norms in a raft of sectors comes as a Deepavali bonanza to investors and the markets. The decision to allow foreign institutional investors, foreign portfolio investors and qualified foreign investors to independently or together own up to 74 per cent — the prescribed sectoral limit — in private banks, subject to management control remaining unchanged, will offer some of them greater flexibility in expanding their capital base. In defence production, investment up to 49 per cent has been put under the automatic route, and proposals for higher overseas ownership will now go to the Foreign Investment Promotion Board instead of the Cabinet Committee on Security, shortening the lead times for approval. The combination of all these measures could potentially boost FDI inflows and offer multiple spin-off benefits to the economy, not the least of which would be increased job creation and higher tax revenue. Still, for investors to actually bite the bait and begin moving capital and technology into the country, Mr. Modi must ensure that the reforms momentum is sustained over the coming weeks and months.