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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