Union Cabinet Headed By PM Modi To Review FDI Policy Today

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The International Air Transport Association (IATA), a global grouping of airlines that includes Air India, said the amendment in the FDI policy is a step in the right direction.

The government also chose to allow Foreign Institutional Investors and Foreign Portfolio Investors to invest in power exchanges through primary markets.

India allows 100% FDI in single-brand retail, but investment beyond 49% requires prior government approval.

The SBRT entity shall be required to meet the 30% sourcing norms directly towards its India operation after the initial 5-year period.

The Cabinet also chose to make changes relating to competent authority for examining FDI proposals from countries of concern.

CAIT National President Mr B C Bhartia & Secretary General Mr Praveen Khandelwal while expressing utter dismay said that 100 % FDI in single brand -automatic route will kill domestic manufacturing sector and will give a big jolt to Make in India??! However, foreign investors' purchases were restricted to the secondary market only.

Foreign ownership might soon be a reality for Air India as the government pilots efforts to privatise the ailing national airline and turnaround its flagging fortunes similar to the likes of British Airways and Qantas.

"It's hard for me to say what exactly is holding the government back from allowing foreigners in multi-brand retail, because consumers stand to be benefit and supply chains can improve", another industry expert said.

"Extant FDI policy on SBRT allows 49 per cent FDI under automatic route, and FDI beyond 49 per cent and up to 100 per cent through Government approval route". But the provision was not applicable to Air India. On our part it was a cautious decision to keep our national carrier Air India out.

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P.N. Vijay, a market analyst, said the decision was "not good enough".

Under the relaxed norms, a foreign retailer will be able to get credit from incremental increase in sourcing for its global operations from India towards the mandatory 30 per cent local sourcing requirement for its business in the country.

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.

"I don't think its going to make much change because nearly all the major brands of the world are already here as 100 per cent FDI was already allowed". Prime Minister will deliver the keynote address at the plenary session.

During the tenure of the previous, Congress-led government, the BJP, sitting in opposition, stalled parliamentary proceedings for days on end, maintaining that opening up the sector to foreign investors would wipe out small local retailers.

At the daily briefing, the Congress played old speeches of Modi attacking the then UPA government for allowing FDI in single brand retail. It said the move will smooth the progress of the easy entrance of multinationals in retail trade and will go against the BJP's poll pledges.

"It's a serious matter for small businesses", he said, adding the move was in a violation of the election promise made by the Bharatiya Janata Party.

Echoing Singhal's thoughts, Anil Talreja, partner, Deloitte Haskins & Sells LLP, said he does not expect anything to change much for retailers.