New Delhi: The Union Cabinet on Wednesday announced major policy decisions which will impact foreign players and domestic markets in a big way. The government has allowed 100% FDI in single brand retail and construction; also, it6 has opened up Air India for FDI up to 49%.
It has also allowed foreign institution and portfolio investors to put money in power exchanges through primary market and amended the definition of “medical devices” in the FDI policy. An official statement claimed, “It will lead to larger FDI inflows contributing to growth of investment, income and employment.”
There were, however, protests from the trade union bodies, including the RSS-affiliated Bharatiya Mazdoor Sangh, as also from the CPM, on the opening up of retail trade and the Air India decision, which they claimed will lead to more unemployment. The traders’ bodies also opposed retail trade decision as “a serious matter for small businesses.”
Single-brand retail refers to a business that sells goods to individual customers, not other businesses. Also, goods are all sold under the same brand — Nike, for example. So, such stores can only sell Nike products. The Confederation of All India Traders said this single step will hit the small businesses by paving the way for foreign brands which will dominate the retail trade. The industry organisations, however, welcomed the decision saying it would generate employment and give the Indian consumer access to a wider range of international brands.
A government statement said FDI is a major driver of economic growth and a source of non-debt finance for economic development. It said the government has put in place an investor friendly policy, under which FDI up to 100% is permitted in automatic route in most sectors/ activities. (Under the automatic route, the foreign investor does not require any approval from the RBI.)
The Cabinet also decided to make changes relating to vetting of FDI proposals from countries of concern like China and Pakistan. Instead of the Home Ministry giving security clearance to such investments falling under automatic routes, the applications will be processed by Department of Industrial Policy and Promotion, while they will be dealt by the concerned ministry in cases under the government approved route.
IN CONSTRUCTION: The Cabinet also decided to allow 100 per cent FDI in construction development relating to building townships, housing, infrastructure and real estate broking services.
“It is 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,” the statement said. “The liberalisation effected on Wednesday is in line with a number of FDI policy reforms effected in the recent past in many other sectors like Defence, Construction, Insurance, Pension, Other Financial Services, Asset reconstruction, Companies, Broadcasting, Civil Aviation, Pharmaceuticals, Trading, etcetera,” said the statement. The present FDI policy on single brand retail trading allows 49 per cent FDI under automatic route and up to 100 per cent through government approval.
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