The Union Cabinet chaired by Prime Minister Narendra Modi on Wednesday decided to allow 100% foreign direct investment in single brand retail through the automatic route – companies making these investments will not require permissions from the government or the Reserve Bank of India.
So far, the government allowed Foreign Direct Investment in single brand retail up to 49% through the automatic route, but any investment above that limit required the government’s approval.
The move is intended to “liberalise and simplify the FDI policy to provide ease of doing business in the country,” the government said, adding that the relaxed policy will lead to more investment and improve income and employment.
The Cabinet has also cleared 100% FDI in the construction sector through the automatic route. The new rules are expected to speed up clearances and investments.
Boost for Air India divestment
The cabinet also eased FDI rules for civil aviation, just days after the government said it will go ahead with the privatisation of the debt-ridden national carrier Air India.
So far, foreign airlines were allowed to invest with the government’s permission in the capital of Indian companies operating air transport services up to 49%, but they were not allowed to do so in Air India.
“It has now been decided to do away with this restriction and allow foreign airlines to invest up to 49% under the approval route in Air India,” the government said. However, these investments cannot exceed 49% directly or indirectly, and the ownership and control of the airline will remain with an Indian national.
The Congress, however, has criticised the Centre’s decision to allow 49% FDI in the national carrier, since it came after reports claimed a parliamentary panel had suggested waiting to disinvest in the airline. The panel had reportedly said disinvesting in Air India when it has shown operational profits would not be advisable.
“This is a departure from policy,” Congress leader Anand Sharma told NDTV. “Foreign carriers cannot be allowed to take over national carrier – you can allow equity participation. Clearly the government does not want to infuse funds.”
As of July 2017, the national carrier had accumulated a loss of more than Rs 50,000 crore and debts of around Rs 55,000 crore.