Wednesday, January 18, 2012

India Considering Allowing FDI Up to 49 Percent

Reports today indicate that India's Aviation Ministry has recommended rule changes that would allow foreign airlines to purchase shares in Indian carriers. See Anurag Kotoky & Aniruddha Basu, India Moves to Let Foreign Airlines Invest, Reuters, Jan. 17, 2012 (available here). The Ministry's recommendation would permit foreign carriers to own up to 49 percent stake in an Indian airline, a significantly higher limit than the numbers reportedly under consideration a month ago. This would give foreign airlines the same investment rights as non-airline foreign investors. Foreign airlines are currently prohibited from making any investment in Indian carriers. The proposed change awaits approval by the Union cabinet before it can take effect, but industry observers and market investors appear optimistic about the measure's success. See Tarun Shukla & P.R. Sanjai, Cabinet to Take Up 49% Airline FDI, livemint.com, Jan. 18, 2012 (available here).  While approving any foreign investment in its airlines is novel for India, the contemplated upper limit of 49 percent would nevertheless keep India firmly within the range of foreign ownership (i.e., less than a majority stake) permitted by the nationality rule in bilateral air services agreements.

 

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