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Cabinet approves 100% FDI in single-brand retail

Cabinet approves 100% FDI in single-brand retail

A shopper walks out of store at a mall in Mumbai, India, July 10, 2017.

This follows a Cabinet decision to allow 100 per cent FDI in single brand retail under automatic route, while also easing local sourcing norms.

The CPI (M) too criticised the decision.

"They are now actually private sector airlines because the private sector can run airlines far better than government running them".

The government's latest announcement will quicken the FDI process as governmental approval is not needed, said sector specialists and observers.

Until now, SBRT entities were required to source 30% of their purchases from India.

This essentially means that government approval is no longer required for FDI in single brand retail trading.

Incremental sourcing has been defined as the annual increase (in value terms) of the SBRT firm's global sourcing from India for the single brand.

Industry experts welcomed the move.

Once the country's monopoly airline, Air India has slowly lost market share to new low-priced private players in one of the world's fastest-growing airline markets. The Indian retail market is divided into organised market valued at $60 billion which is only 9 percent of the total sector while the unorganised market constitutes the rest 91 percent of the sector, according to IBEF. But because of the complicated approval route for investment proposals, they have been hesitant. "Today's decision will further speed this up", Pankaj Renjhen of JLL India said. But substantial ownership and effective control of Air India must remain with an Indian national, the government said in a statement.

Debt-laden Air India is staying afloat on taxpayers' money.

This relaxation is applicable for the first five years, which will allow global retailers to come in with worldwide merchandise without concerns of loss of quality and brand equity. Overseas investment policy has also been liberalised in case of power exchanges.

In the sector of power exchanges, the government said: "Extant policy provides for 49% FDI under automatic route in Power Exchanges registered under the Central Electricity Regulatory Commission (Power Market) Regulations, 2010". The real estate beneath these projects, however, remains off limits to foreign investors.

As of now, India has just operational power exchanges - Indian Energy Exchange and Power Exchange of India.

Senior Congress leader Anand Sharma said that 100% FDI in single-brand retail was notified during the previous UPA government and the only change made was to allow it through the automatic route.

After complaints from fashion major H&M and furniture giant Ikea on the 30 per cent mandatory local sourcing norms, the government had eased the provision. It has recently abolished the Foreign Investment Promotion Board, the screening committee which was an anathema to foreign investors.

However according to Mishra, there was also an expectation of the Government liberalising the FDI norms for multi-brand retail to enable large worldwide retail chains invest in India and bring latest technologies and retail formats into India, which remains an unfinished agenda presently.



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