Cabinet OKs 100% automatic FDI in single brand retail, eases rules in aviation, but will it make a difference?

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Updated: January 10, 2018 2:09:33 PM

The Union Cabinet today approved 100 percent foreign direct investment (FDI) in single-brand retail through the automatic route, a move seen spurring greater foreign inflows into India’s retail market

fdi, foreign direct investment, damro furniture, department of industrial policy, investment facilitation portal, retail sector, food product retailThe Cabinet today approved 100 percent foreign direct investment (FDI) in single-brand retail through the automatic route. (Image: PTI)

The Union Cabinet today approved 100 percent foreign direct investment (FDI) in single-brand retail through the automatic route, a move seen spurring greater foreign inflows into India’s retail market. Previously, the government’s approval was needed for more than 49 percent FDI in single-brand retail. Welcoming the move, Ajay Dua, former DIPP secretary said, “I would see more inflow of capital into the country. Indian market continues to be attractive for FMCG companies around the world.” The Union Cabinet Meeting was chaired by Prime Minister Narendra Modi.

Further, in another major move, the Union Cabinet also approved 100% FDI in the crucial aviation and construction sectors under automatic route. It also approved 49% FDI in the national carrier Air India under approval route, amid the ongoing talks about the disinvestment of government’s stake in the financially troubled airline.

“The Cabinet allowed overseas investors to invest 100 percent FDI (foreign direct investment) in single brand retail
trading and construction development without any government approval,” an official statement said.

However, while welcoming the move, Ajay Dua said that it will not make a very significant difference, as the norms on ease of doing business have already been made simpler, and approvals have been expedited to 90 days. To that extent contribution to making the business easier already done. But, overall this is better, Ajay Dua told CNBC TV18.

Earlier it was reported that the government was considering allowing 100% foreign direct investment (FDI) through automatic route in single brand retail to attract a larger number of global players in the sector. Earlier, Foreign investment beyond 49% needed government’s nod and was allowed subject to certain conditions, which require products to be of a ‘single brand’ only and to be sold under the same brand globally.

Sandeep Jain, Executive Director of Monte Carlo Fashions, said it will not make difference for the Indian players, as many international brands are already there in India. It makes the process easier certainly, but the brands which want to be there in India are already there, Sandeep Jain told CNBC TV18.

According to the rules, in respect of proposals involving FDI beyond 51%, it is mandatory to source 30% of the value of goods purchased from India, preferably MSMEs. “The move assumes significance as the government wants to provide easy policy for both domestic and foreign investors. Single brand retail trading sector has huge potential to attract FDI,” PTI had reported a source as saying.

For the first time in February 2006, the government allowed 51% FDI in the segment. Foreign investments are considered crucial for India, which needs around $1 trillion for overhauling its infrastructure sector such as ports, airports and highways to boost growth, according to a PTI report.

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