New Delhi: The Union Cabinet on Wednesday approved 26% foreign direct investment (FDI) in digital media, in what may be seen as an extension of Prime Minister Narendra Modi’s Digital India campaign. The Centre had earlier approved 26% FDI in print media and 49% for news channels.
The move is, however, being seen as restrictive by media industry experts since until now there has been no clarity on FDI in digital news web sites and there may be several in India with 100% foreign investment. In a PIB release the government clearly stated: “The extant FDI policy provides for 49% FDI under approval route in uplinking of news and current affairs TV channels. It has been decided to permit 26% FDI under government route for uploading/ streaming of news and current affairs through digital media, on the lines of print media."
Media industry executives and digital news site owners feel that even though the fine print on the policy is yet to be available, at first glance the policy looks restrictive. “What happens to the Microsoft news site or Huffpost or many others, which may be 100% on their own in India? Will they have to reduce their stake and find local partners?" asked the owner of a digital news site, claiming he is safe as he has only 26% FDI in his venture. He declined to be named.
Another media executive said it is not clear whether all digital news sites will need permission from the government or only those with 26% FDI will need a licence. “Basically the new norms look very restrictive. Even TV news – which is a linear medium — is allowed 49 % FDI. Internet is borderless then what sense does 26% restriction make?" he said, requesting anonymity. “Nowhere in the world you need government permission to set up a digital news site and there are no restrictions on FDI," he added. In case the government is equating digital news with newspapers, will it also put restriction on the editors of news sites that they need to be Indian citizens, he asked.
However, the owner of the news site quoted earlier pointed out that the government doesn’t seem to have thought through this policy. “The twist will be in the detailed guidelines. But the big question is how will you monitor this? Or will you ban all overseas news websites like China does? It looks incredibly complex at the moment," he said. The media executive agreed: “How the government administers this remains to be seen. Does this policy cover companies which are registered here or have their servers in India? These issues need clarity." A media lawyer who declined to be named said: "If this policy refers to news and current affairs outlets only, it would mean a cap on investment for them in India and a cumbersome route to government approval."
Yet there are others who have welcomed the move. “This will now allow digital platforms to be unlocked from the bigger companies and seek separate valuation," said Jehil Thakkar, partner, Deloitte India.
Chandrima Mitra, partner, DSK Legal, said although the policy details are still awaited, “as a preliminary thought, this move should allow the domestic digital media players to separate their digital media businesses from their broadcasting and print businesses and take FDI only in the digital media business. Given the penetration of mobile networks and the easy availability of broadband and data services in India, this move will encourage growth in development of content and distribution in the digital media business."
According to Gautam Sinha, CEO, Times Internet, a significant part of the growth in the media sector is coming from digital consumption of content with around 25% of the Indian youth being hooked to this medium. It is great that the potential of digital content is being recognized and an industry-specific exception is being made in the guidelines. This move will definitely benefit the online media industry since it will help companies raise additional capital from overseas players/investors." He, however, said that he would like to see FDI norms in the sector being further liberalized in the years to come.