The government’s announcement introducing a 26 per cent foreign direct investment (FDI) cap on digital media entities has raised several concerns among industry executives and experts, who say that detailed guidelines have to be released to bring clarity over it. While some have termed the introduction of FDI caps on the digital media sector “restrictive”, others raised the question of applicability of the cap on digital media platforms run by television companies.
“The extant FDI policy provides for 49 per cent FDI under approval route in up-linking of ‘News and Current Affairs’ TV channels. It has been decided to permit 26 per cent FDI under government route for uploading/streaming of news and current affairs through digital media, on the lines of print media,” said a government statement.
This throws up a host of problems for digital news media outlets. According to analysts, the digital media segment including news and current affairs related sites did not come under the ambit of FDI regulations earlier. Nikhil Pahwa, founder of news website MediaNama.com noted that the change was a restriction.
“This is not permission, it is a restriction. Digital media did not have limits earlier,” Pahwa tweeted, going on to raise other questions including what would happen to news portals that have already raised FDI over the now imposed 26 per cent limit and Indian units of foreign digital publications. “Will FDI regulations will apply to those uploading contents on YouTube or Facebook, or to platforms (Facebook, YouTube) themselves?” he pointed out.
Other experts agree on the lack of clarity on how the policy will be applied, especially in digital units of television companies. “The scope of the impact will be determined by the wording of the provision in the FDI policy. News and current affairs are present on social media platforms, on digital platforms that are subsidiaries of foreign brands etc. How would you differentiate between TV channels which have 49 per cent and their online streams, which will effectively have 26 per cent?” asked Manav Sethi, group chief marketing officer, Eros International.
“This throws up some questions which need some clarifications,” agrees Deloitte India’s Jehil Thakkar, pointing out that apart from the tangled issue of applicability, this would also effectively restrict the capital raising capacities of digital media start-ups. “We have already raised a significant amount of capital, but we are growing fast and will need to raise more in future. This hobbles us, since there were no such limits earlier. This 26 per cent route is also not automatic, but needs government approval,” pointed out another founder of a digital media site.
However, experts say that the announcement does finally provide some clarity for television and print organisations which can now spin off separate units for their units based on whether they are digital (26 per cent cap), print (26 per cent cap) or television (49 per cent).
FDI in India dipped 1 per cent to $44.36 billion in 2018-19. Last year, the government had relaxed FDI rules for several sectors, including single-brand retail, NBFCs and construction.