Center approves 100% FDI in single-brand retail under automatic route
The government has approved 100% Foreign Direct Investment (FDI) in single-brand retail and construction development without government approval and relaxed norms for other sectors, including aviation. Real estate broking is also eligible for 100% FDI under automatic route as it doesn't amount to real estate business. Find out the details of what the new rules will mean for businesses.
What exactly is FDI?
FDI is when a company/individual in one country makes an investment in an entity in another country. It can be either by establishing operations or acquiring assets. They differ for portfolio investments as in the latter, an investor only buys equities in foreign companies.
What are the new rules for single-brand retail?
Earlier, FDI was allowed on automatic route till upto 49% in single-brand retail, which has now been increased to 100%. For the first five years of launching operations in the country, entities no longer require to source 30% good from India; earlier, this was mandatory. After five years, "the entity shall be required to meet the 30% norm...on an annual basis," the government said.
How will it help the sector?
With the relaxation of norms, the FDI process will be quickened, which will boost ease of doing business and "lead to larger FDI inflows contributing to growth of investment, income and employment," a government statement said. This is expected to boost foreign retailers like IKEA.
CAIT claims move will hamper small businesses, leave people jobless
Meanwhile, the Confederation of All India Traders (CAIT) has opposed 100% automatic FDI in single-brand retail, saying it will ease business for MNCs and deter small businesses. A large number of people will be rendered jobless, claimed Praveen Khandelwal, CAIT's National Secretary General. Khandelwal said the Confederation will soon declare a nationwide strategy to protest the decision.
Policy changes in other sectors
Among other policy changes, the government has allowed foreign airlines to invest up to 49% in Air India under approval route. This scheme was earlier applicable to companies operating scheduled and non-scheduled air transport services. Foreign Institutional Investors/Foreign Portfolio Investment (FIIs/FPIS) can now invest in power exchanges through primary markets too; earlier, 49% FDI was permitted for them, but were restricted to secondary markets.
Second major FDI policy upheaval by NDA government
In 2016-17, total FDI inflow hit an all-time high of $60.08bn. A year ago, it was at $55.46bn. During April-September'17, FDI inflows grew 17% year-on-year at $25.35bn. This is the NDA government's second major FDI policy upheaval in one go. It had last effected drastic changes in June'16. The budget for 2018-18 will be presented on February 1.