The Union Cabinet On Wednesday made a slew of amendments in country's Foreign Direct Investment policy for key sectors. In some sectors, it allowed 100 per cent foreign investment while in others the cabinet raised the existing foreign investment limit. These sectors involve single brand retail trading, construction, power exchanges and aviation.
The government in a press statement informed that it has permitted 100 per cent FDI under automatic route for single brand retail trading. Under the existing policy, this limit was 49 per cent and for 100 per cent FDI, the government approval was required. After the amendments, no government approval is required for 100 per cent investment.
In the civil aviation sector, the government for the first time has allowed foreign investors to put money in Air India. So far, foreign airlines were allowed to invest in Indian companies operating scheduled and non-scheduled air transport services up to the limit of 49 per cent. However, this provision was not applicable to Air India, thereby implying that foreign airlines could not invest in the state-run airline. "It has now been decided to do away with this restriction and allow foreign airlines to invest up to 49 per cent under approval route in Air India," the statement said.
The government has made it clear that foreign investments in Air India including that of foreign Airlines should not exceed 49 per cent either directly or indirectly and substantial ownership and effective control of the national carrier will continue to remain in Indian national (keeping privatisation in mind).
The Cabinet also clarified that "real-estate broking service does not amount to real estate business and is therefore, eligible for 100 per cent FDI under automatic route. This is the second round of FDI reform that the Modi government has unleashed. In past, the government introduced multiple FDI policy changes for defence, construction development, insurance, pension, Broadcasting, Civil Aviation, Pharmaceuticals and Trading.
The government has claimed that after the initial move FDI inflows increased substantially. "During the year 2014-15, total FDI inflows received were US $ 45.15 billion as against US $ 36.05 billion in 2013-14. During 2015-16, country received total FDI of US $ 55.46 billion. In the financial year 2016-17, total FDI of US $ 60.08 billion has been received, which is an all-time high," the statement said.
Foreign investment is a major driver of economic growth and a source of non-debt finance for the economic development of the country, the government claims.
Meanwhile, the Confederation of All India Traders has hit out at the government for the 100% FDI in retail brand. It said: "100 per cent FDI in single brand retail through the automatic route will facilitate easy entry of MNCs in the retail trade and also violate the poll promise of the BJP."