The Union cabinet on Wednesday cleared a proposal allowing 100 per cent foreign direct investment (FDI) in single-brand retail via automatic route, a release by the government said. The cabinet also eased FDI rules for aviation and the construction sectors.
In a statement issued, the government said the move was to liberalise and simplify the FDI policy to provide ease of doing business in the country. The decision, it claims, will lead to larger FDI inflows contributing to growth of investment, income and employment. In the construction sector, the government has allowed 100 per cent FDI under automatic route.
The existing policy FDI policy on Single Brand Retail Trading (SBRT) allows 49 per cent FDI under automatic route, and FDI beyond 49 per cent and up to 100 per cent through government approval route. It has now been decided to permit 100 per cent FDI under automatic route for SBRT.
Boost for Air India?
In civil aviation, the existing policy allows foreign airlines to invest under government approval route in the capital of Indian companies operating scheduled and non-scheduled air transport services, up to the limit of 49 per cent of their paid-up capital.
This provision, however, was not applicable to Air India. The Union cabinet 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 subject to the conditions that: Foreign investment(s) in Air India including that of foreign Airline(s) shall not exceed 49 per cent either directly or indirectly and that (b) substantial ownership and effective control of Air India shall continue to be vested in Indian national.
The government has also decided to do away with the provision that restricted FII/FPI purchases to secondary market only, thereby allowing FIIs/FPIs to invest in Power Exchanges through primary market as well. The existing policy provided for 49 per cent FDI under automatic route in Power Exchanges registered under the Central Electricity Regulatory Commission (Power Market) Regulations, 2010.
Meanwhile, the Confederation of All India Traders (CAIT) has reacted sharply to the government’s move saying it will oppose any move to allow 100 per cent FDI in single brand retail through automatic route. CAIT claims the decision will facilitate easy entry of MNCs in retail trade.
“It’s a serious matter for small businesses. It is a pity that instead of formulating policies for the welfare, upgradstion and modernisation of existing retail trade, the government is more interested in paving way for the MNCs to control and dominate the retail trade of India,” National Secretary General oF CAIT Praveen Khandelwal said.