The Indian government on Tuesday notified its decision to permit 100% foreign direct investment (FDI) under automatic route in the telecom services sector.

The Centre had earlier announced 100% FDI in the telecom sector through the automatic route as part of its comprehensive package for the telecom sector.

In a press note, the Department for Promotion of Industry and Internal Trade (DPIIT) said foreign investment in telecom services will be subject to the condition of Press Note 3 of 2020.

Under the amendment, 100 per cent FDI via the automatic route will be allowed into telecom services including telecom infrastructure providers 'Category-I'.

In financial parlance, under this route no prior permission from the Centre or RBI is required by a foreign entity before making an investment.

Till now, only 49% of FDI was allowed through the automatic route and anything beyond it had to mandatorily go through the government route.

This comes over a year after union government notified changes in the FDI rules in April 2020, which made prior approval of the government mandates for foreign investments from countries that share a border with India, including Pakistan, China, Bangladesh and Nepal among others.

On its part, India Inc welcomed the move.

According to Lt Gen Dr S.P. Kochhar, DG, COAI: "The FDI approval will help the industry to build a robust telecom sector for new India. Through the amendment in license agreements, telecom service providers will be eased off the huge burdens of bank guarantees and will enable the availability of more funding for the expansion of the telecom network and build a 'Digitally Connected India'."

As per the Press Note 3, an entity of a country, which shares a land border with India or where the beneficial owner of an investment into India is situated in or is a citizen of any such country, can invest only under the government route.

The Centre has already allowed FDI through automatic routes in many sectors. However, in sectors such as defence, media, pharmaceuticals and insurance, government approval is needed for foreign investors.