The government has approved 100% Foreign Direct Investment(FDI) for single-brand retail via the direct route. The new decision has opened the country’s economy for global players, removing all the hurdles for investment. The cabinet also eased FDI rules for aviation and the construction sectors, allowing foreign airlines to invest up to 49% in Air India under approved routes, reports The Indian Express. The government hopes that it will help the debt-ridden airline, having 51% of stake in government’s hand.
The decision was taken in a meeting chaired by PM Narendra Modi on Wednesday. The centre said that this move will contribute to the growth of investment, income and employment and would lead to more significant FDI inflows. Earlier in 2016, the government has relaxed FDI rules in areas such as defence, civil aviation, construction and development, private security agencies, real estate and news broadcasting.
Confederation of All India Traders opposed government’s decision, saying that it would allow easy entry of multinationals in retail trade. “It’s a serious matter for small businesses. It is a pity that instead of formulating policies for the welfare, and modernisation of existing retail trade, the government is more interested in paving the way for the MNCs to control and dominate the retail trade of India,” said Praveen Khandelwal of National Secretary General of CAIT.
“The approval through automatic route with respect to single brand retail trading will quicken the FDI clearance process as no prior government approval would be required. We expect that FDI in the single-brand retail trading sector will now gain further momentum due to the process not being subject to regulatory scrutiny and approval process,” Rabindra Jhunjhunwala, Partner, Khaitan & Co said.
The Current Policy
The current FDI policy allows 49% investment under the automatic route. FDI above 49% needs government approval. But, now it has been decided to allow 100% FDI under the automatic route.
