Wednesday, 23 January, 2019

India Eases Foreign Investment Rules To Push Growth

The government’s proposal to allow foreign airlines to own 49 per cent of Air India while it retains management control is welcome India Eases Foreign Investment Rules To Push Growth
Melinda Barton | 13 January, 2018, 06:15

Regarding the decision of the government of allowing 100 per cent FDI in single-brand retail trade, the CITU-the trade union of the CPI (M) - condemned the move and said that the decision would increase the hardship of traditional retail market. The only significant change has been the decision to allow foreign airlines to acquire up to 49% in Air India, these critics admit, but we are still far too early in the disinvestment process of the state-owned airlines to make much of this. But opening the floodgates as far as single brand retail trading is concerned, which is bound to dilute norms such as 30% mandatory local purchase, spells trouble ('Business' page - "Centre opens arms to single brand retail FDI", January 11).

Swadeshi Jagran Manch has said that easing the norms for FDI in SBRT would go against the best interest of the country.

Modi is trying to lure foreign capital to revive economic growth that is seen expanding at the slowest pace since he came to power in 2014.

However, the Government has clarified that "FDI in Air India including that of foreign Airlines should not exceed 49% either directly or indirectly and substantial ownership and effective control of the national carrier will continue to remain in Indian national". "In turn, it will lead to larger FDI inflows contributing to growth of investment, income and employment", said an official statement. FIIs/FPIs will also be allowed to invest in Power Exchanges through primary market.

Government has put in place an investor friendly policy on FDI, under which FDI up to 100%, is permitted on the automatic route in most sectors/ activities. It is therefore, eligible for 100 per cent FDI under the automatic route. The amendment is likely to benefit companies such as Swedish furniture maker Ikea, which is planning to set up stores across the country.

However, he said, it was expected that the government's liberalisation of FDI norms for multi-brand retail would enable large global retail chains to invest in the country and bring latest technologies and retail formats into India.

Allowing incremental sourcing undertaken by overseas companies to be counted towards the 30% sourcing commitment for the initial five years will provide them with the flexibility and time to align their retail and sourcing business in India.