Center approves 100% FDI in single-brand retail under automatic route

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In major changes liberalising foreign direct investment in key sectors, the Union Cabinet on Wednesday approved 100 per cent foreign investment in single brand retail trading.

The government said that the decision would help provide ease of doing business and also lead to larger FDI inflows contributing to growth of investment, income and employment.

In the recent past, the Government has brought FDI policy reforms in a number of sectors including Defence, Construction Development, Insurance, Pension, Other Financial Services, Asset reconstruction Companies, Broadcasting, Civil Aviation, Pharmaceuticals and Trading.

To widen competition for the purchase of Air India, which is to be put on the block soon as part of the disinvestment plan, the government has also lifted the restriction barring foreign airlines from picking up stakes in the national carrier.

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"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.

Foreign airlines can now own up to 49% stake in national carrier Air India, with the Cabinet clearing a proposal in this regard today.

It also said that Core investing companies and an Indian company engaged in investment activities would be allowed to receive FDI under automatic route provided their activities are regulated by financial sector regulator like RBI or SEBI.

Surviving on taxpayers' money, Air India is estimated to have a debt burden of more than Rs 50,000 crore. It is expected to report a net loss of Rs 3,579 crore for 2017-18.

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So far 49 per cent FDI was permitted under automatic route in power exchanges registered under the Central Electricity Regulatory Commission (Power Market) Regulations, 2010. "I don't think it's going to make much change because nearly all the major brands of the world are already here as 100 percent FDI was already allowed". Until now, foreign investors were supposed to invest in power exchanges through the secondary market only.

The Communist Party of India (Marxist) pointed out that the Bharatiya Janata Party (BJP) has "hypocritically reversed it position" on the issue as it was opposed to FDI in retail trade when in the opposition. "Congress is giving nation to foreigners. most parties opposed FDI but due to sword of CBI, some didn't vote & Cong won through back door!", Narendra Modi had tweeted on 5 December 2012. The definition of "medical devices" has been amended in the FDI policy, an official release said. "This will liberalise and simplify the FDI policy and provide ease of doing business in the country.#ReformsInFDIpolicy #FDIpolicyForNewIndia".

The government has also relaxed mandatory local sourcing requirement of 30 per cent, which has been a long standing demand from players such as IKEA and H&M.

This is unedited, unformatted feed from the Press Trust of India wire.

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