New Delhi: In big bang reforms ahead of BJP government’s last full Budget, foreign airlines were on Wednesday allowed to buy up to 49 per cent stake in Air India while easing FDI rules for several sectors including single brand retail and construction.
In a bid to boost growth and improve ease of doing business, the Union Cabinet allowed 100 per cent foreign direct investment (FDI) in single brand retail and construction development under the automatic route.
The Cabinet also allowed foreign institutional and portfolio investors to invest in power exchanges and relaxed FDI policy for medical devices and audit firms associated with companies receiving overseas funds.
Besides, the clarification that real estate broking service will not amount to real estate business has addressed the issue being faced by such firms. It is therefore, eligible for 100 per cent FDI under the automatic route.
The decisions came ahead of Modi’s participation in World Economic Forum at Davos this month where he is likely to hard sell India as an attractive investment destination.
They also came weeks before the BJP government presents its fifth and final full year budget on February 1 before general elections next year.
“By permitting FDI up to 100 per cent under automatic route in single brand retail trading, the government has eliminated the time lag for foreign investor to set up a single brand retail operations in India,” said Dev Raj Singh, Executive Director, Tax & Economic Policy Group, EY India.
The changes will give a boost to FDI inflows, he said.
In a move that will give a boost to foreign retailers like Ikea, the government approved 100 per cent FDI under the automatic route for single brand retail trading. Earlier also 100 per cent FDI was allowed in the segment, but it required government approval.
The amendments are intended to liberalise and simplify the FDI policy so as to provide ease of doing business. “In turn, it will lead to larger FDI inflows contributing to growth of investment, income and employment,” the government said in a statement.
Commerce and Industry Minister Suresh Prabhu said the decisions would help “remove roadblocks” for receiving foreign investments and expressed the hope that relaxation of norms would facilitate faster development of the economy. “The move will not only attract additional foreign capital into the country, but will also provide an impetus to the retail industry growth, at a time when organised and retail is already seeing strong growth over the last 12 months,” said Rajat Wahi, Partner, Deloitte India.
Secretary in the Department of Industrial Policy and Promotion (DIPP) Ramesh Abhishek said the move would help further improve investment climate in India. Relaxing a procedural requirement, the government said it has now been decided that for investments in automatic route sectors, requiring approval only on the matter of investment being from country of concern (that is Pakistan and Bangladesh), FDI applications would be processed by the DIPP for government nod.
Cases under the government approval route, also requiring security clearance with respect to countries of concern, will continue to be processed by concerned administrative department or ministry.
Earlier the applications were processed by the Ministry of Home Affairs.