India woos foreign cos with new norms

Indian prime minister Narendra Modi relaxed foreign investment rules this week ahead of his visit to Davos this month. Reuters

Indian prime minister Narendra Modi relaxed foreign investment rules this week ahead of his visit to Davos this month. Reuters

"A cabinet meeting, chaired by Prime Minister Narendra Modi, gave investors the go-ahead to invest 100 per cent in single-brand retail and other sectors without government's approval, " Government Spokesman, Frank Noronha, said.

Swadeshi Jagran Manch has also expressed its deep displeasure about government decision to allow 40% foreign investment in Air India. It also permitted foreign airlines to invest up to 49 percent under the approval route in the debt-ridden, loss making national carrier.

The amendments are meant to liberalise and simplify the FDI policy so as to provide ease of doing business. As the real estate business has been crippled, allowing 100% FDI under the automatic route for real estate broking services can help matters.

The government has allowed investment of about 49% on Air India, ahead of the union budget 2018-19.

While India has seen its economy slowing recently, it has managed to secure a lot of foreign capital even without the new opportunities in place for entrepreneurs from overseas. The Cabinet has allowed 100% FDI via automatic route in single brand retail trading and construction, while it has raised the existing limit in power exchanges and aviation sectors.

In the case of medical devices, the government has permitted a wide range of items that can attract up to 100 per cent FDI via the automatic route.

Even while acknowledging that changes in FDI policy should not be equated with big reforms - that description should be reserved for such changes as fundamentally reshaping agricultural or labour markets - this criticism is a tad unfair.

Single-brand retail has been open to 100% FDI since 2011; the main draw for investors will be multi-brand retail-this has been pending due to a fear of retaliation from kirana store owners. "This should also generate employment and give the Indian consumers access to several worldwide brands", said Pinakiranjan Mishra, partner and national leader, consumer products and retail, EY.

However, the government has yet to liberalise norms for multi-brand retail to enable large global retail chains to invest and bring latest technologies to India.

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