FDI inflow expected to flourish the industry further

July 12-2019
Budget 2019 points at further opening up of FDI in AVGC sector; industry reacts

The media and entertainment (M&E) sector in India is growing by leaps and bounds, which also reflects the growth of the Indian economy. The M&E sector grows with the economy albeit at a higher pace, and its medium term outlook is bright. Favourable demographics, a rise in consumer income and a huge demand for knowledge, escapism, news and sports aided the growth of the sector in the country.

In the recent announced budget, to attract more global investment, the Government will consider further opening up of foreign direct investment (FDI) in aviation, media, animation and the insurance sector in consultation with stakeholders, finance minister Nirmala Sitharaman said while presenting her maiden Union Budget.

She said the government will likely permit 100 per cent FDI for insurance intermediaries. Despite global headwinds, India’s FDI inflows rose six per cent in 2018-19 to $64.37 billion, she added.

“I propose to further consolidate, the gains in order to make India more attractive FDI destination. The Government will examine suggestions of further opening up of FDI in aviation, media, AVGC (Animation, Visual effects, Gaming and Comics) and insurance sector in consultation with stakeholders,” Sitharaman said.

BARC India CEO Partho Dasgupta

According to the latest FICCI EY report, from April 2000 to June 2017, FDI inflows in information and broadcasting (including print media) reached US$6.6 billion. In fact, 100 per cent FDI allowed in film, advertising, TV Broadcasting (except news) and cable networks; investment in DTH by broadcasters continues to be capped at 20 per cent. India’s Media Regulatory restrictiveness index 2016 score is 0.280.  

Currently, the government allows 26 per cent FDI in publishing of newspapers and periodicals involved with news and current affairs through the approval route, while in aviation, foreign carriers are allowed to own 49 per cent in Indian carriers.

Sitharaman also said the government will look at local sourcing norms for FDI for single-brand retailing sector. The budget invited a lot of positive feedback from personalities from the AVGC industry, expecting flourishing growth in the AVGC space.

Here are what few industry veterans has to say about it:

BARC India CEO Partho Dasgupta said, “The budget directionally augurs well for boosting long-term economic growth by focus shown on infrastructure improvements, strengthening benefits to MSME sector and investments on improved skill sets of human resources. Steps taken to attract investments by relaxing FDI, FPI and NRI norms, coupled with boosting public sector banks and NBFC, will trigger the much-desired credit boost. Coming to the M&E industry, one will have to carefully look at the impact of allowing FDI in the media sector. We are happy as BARC India, for the impetus given to start-ups which will further propel efforts of the overall industry on innovation and digitisation.”

ABAI president and Technicolor India head Biren Ghose too welcomed the FDI inflow. Commented he on social media, “FDI has already been a turbo charger for Indian media in broadcasting and production through CG and animation services. International structures create value & growth helping scale content from and for India. The new impetus will help scale skills in Animation, Visual Effects, Games and Comics.” 

From left to right : Biren Ghose, Prithvi Singh and Rajan Navani

JetSynthesys managing director and vice chairman Rajan Navani also expects positive outcome of the proposal to allow FDI in the sector. “With the Indian digital gaming and entertainment industry at an inflection point, the opening up of FDI will give impetus to the industry as it rides the wave of digitization with superior technology providers leading the way. For the gaming industry in particular, an increasing number of millennials are exploring exciting gaming formats like eSports today and this development will aid the growth of gaming companies to further innovate and realize their full potential,” he noted. Navani is also the current chairman of the Confederation of Indian Industry’s (CII) Indian Digital Gaming Society (IDGS).

Gameskraft founder and CTO Prithvi Singh added, “We at Gameskraft appreciate the Union Budget announcement by the honourable finance minister. The announcement in connection to address issues faced by entrepreneur and startup community is a relief. With the implementation of the policy discussed startups, especially dependent on angel investors, will be able to operate business without much of a hassle. The no-scrutiny by IT dept encourages small angel investors to boost the ecosystem. The initiative of kick-starting TV channel program will help to reach out to more people and also investor community thereby becoming an encouraging platform to boost startup culture in India.”

Inviting and allowing FDI inflow in the AVGC sector looks quite promising for now. However, it’s still a matter of time to see to what extent it’s implied in real, after the recommendations are done. Watch this space for more updates!