Govt restricts FDI to 26% in digital media: How will it impact status quo?

In a cabinet meeting chaired by the prime minister, the union government has decided to modify the existing FDI policy regulating several sectors of the economy. The government relaxed Foreign Direct Investment (FDI) in industries such as coal mining, contract Manufacturing, single-brand retail trading and digital media. 

While most of these sectors received relaxations and reformed FDI norms, it was the restriction on foreign investment in digital media which raises questions. 

The government’s official announcement of new FDI norms on digital media reads “It has been decided to permit 26% FDI under government route for uploading/ streaming of news & current affairs through digital media, on the lines of print media.” 

While the cleverly worded press announcement might sound like a liberalisation in digital media to the uninformed, it is the government's new policy to reign in the digital media.

Until now, the FDI policy, allowed only 26% and 49% FDI in print media and news television broadcast companies respectively, whereas there was no notification regarding caps on FDI in the digital news space. 

It was allowed 100% through automatic route.

Additionally, the newly imposed 26% FDI allowance is only through the “ government route” as per the announcement. That means all the foreign investments in digital media would have to go through the government’s machinery to get cleared.

 The government has not released any official explanation to the new policy changes and the official announcement leaves a lot to the imagination. 

The announcement mentions that the existing policy allowed 49% FDI under approval route in Up-linking of 'news & current affairs' TV Channels and then puts the restriction on digital media which is on par with the print media at 26%. 

The new changes could have significant changes in how digital media functions in India.

Would the foreign-owned social media sites like Facebook, Twitter or Snapchat which stream live news in India on their platforms be restricted as well?

Television news broadcast companies who are allowed a 49% FDI, also stream news online. Technically, such companies also have a significant digital footprint. Will they even be regulated? In case they will be treated as non-digital media category, how’s that a playing level field for pure-play digital models?

There are many news aggregator platforms like Flipboard, Google News, Apple News, InShorts and Dailyhunt amongst many others. How would the new policy impact them?

Numerous questions like these will only be answered when the government released an official explanation on the policy or a new gazette dictating the policy changes is issued.