Friday, 12 January 2018

Cabinet supports automatic route to facilitate 100% FDI in single-brand retail

By Ridhima Malhotra

In what is being seen as a push to the Make in India program, the government announced a slew of relaxations in FDI in single-brand retail and other key areas. Although 100% FDI was previously permitted in single-brand retail, only up to 49% was allowed through automatic route. Investments above the 49% cap required permissions from the government. The recent reforms have done away with the requirement of government approval.

The move has been welcomed by many including Arvind Panagaria, the former vice—chairman of NITI Ayog who said that it would ‘boost investments by the single brand retailers’.  Early reports indicated that retailers appreciated the step and hailed it as yet another initiative to improve ease of doing business in India. Multinational chains like Ikea and H&M among others would definitely be watching these developments keenly.
However, the Congress Party dismissed it as gimmick ahead of the World Economic Forum in Davos, which the PM is likely to attend. Senior Congress leader Anand Sharma accused the government of ‘doublespeak’ after it relaxed the local sourcing norms. 

Previously, foreign single-brand retailers needed to meet 30% local sourcing norms to operate their own stores in the country.  Because of the recent easing of caps, companies are now not required to meet the 30% mark for local sourcing by their Indian units for five years provided that they are already doing so for their global operations.
Besides relaxation in single brand retail, government announced a bevy of reforms in sectors such as aviation, real estate and power exchanges. Significant changes in policies have been brought to attract FDI throughout the years. It is yet to be seen if these sweeping relaxations succeed in accelerating big investments in the Indian Markets.  

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