With Foreign Direct Investment (FDI) declining for the first time in the last six years in 2018-19, the government on Wednesday relaxed FDI norms in several sectors like single-brand retail while permitting investment in contract manufacturing, coal mining and digital media to attract overseas players.
Commerce and Industry Minister Piyush Goyal said 100 per cent FDI under automatic route in coal mining and associated infrastructure had been approved by the Cabinet chaired by Prime Minister Narendra Modi.
Besides, to boost domestic manufacturing, 100 per cent FDI in contract manufacturing under automatic route has been allowed, Goyal said. While the existing foreign investment policy permits 100 per cent FDI in the manufacturing sector under the automatic route, it was silent on contract manufacturing till now.
Despite a slump in the manufacturing sector, activity improved in July as new work orders came and output strengthened slightly from the previous month, leading to moderate increase in employment, according to the IHS Markit India Manufacturing Purchasing Managers Index.
For the first time, the government has allowed 26 per cent FDI in digital media. So far, 26 per cent foreign investment was allowed in the print media sector while 49 per cent FDI was permitted in broadcasting content services through government approval route.
On FDI in single-brand retail, the Cabinet has expanded the definition of mandatory 30 per cent domestic sourcing norm. It also allowed single-brand retailers to start online sales, waiving the previous condition of setting up a mandatory brick-and-mortar store, Goyal said.
In her maiden Budget speech in July, Finance Minister Nirmala Sitharaman stated that the government would examine suggestions of further opening up of FDI.
FDI fell 1 per cent to $44.37 billion in 2018-19 as overseas fund inflows slowed down in pharma, telecom and other sectors. In 2017-18, FDI inflows were at a record $44.85 billion, according to data by the Department for Promotion of Industry and Internal Trade. The last time foreign fund inflows showed a reduction was in 2012-13.
Meanwhile, Singapore became the top source of foreign investment into India last fiscal, accounting for $16.22 billion inflows. Mauritius, which was the top investor in India last fiscal, invested in $8 billion in FY19. Other major investors in the country include Japan, the Netherlands, the UK, the US, Germany, Cyprus, the UAE and France.