‘FDI announcements are often followed by nothing or lots of red tape’
Bringing attention back to economic issues after the Bihar-poll debacle, the BJP-led Government has announced easing and simplification of foreign direct investment (FDI) rules in fifteen sectors and raising the threshold limit for approval by Foreign Investment Promotion Board (FIPB) to Rs 5,000 crore from Rs 3,000 crore.
The sectors where rules have been eased include defence, construction development, broadcasting, civil aviation, agriculture, plantation, limited liability partnerships, manufacturing, single-brand retail and private sector banking, according to an official release of the Department of Industrial Policy & Promotion (DIPP).
“These decisions, after they were taken, have been approved by the Prime Mnister, who has the special authority of the Cabinet to make these approvals. These will be sent for post-facto approval of Cabinet,” Finance Minister Arun Jaitley said at a press conference on Tuesday, indicating that the measures would not get stuck at the Cabinet level.
The measures could also spruce up India’s profile and attractiveness as an investment destination prior to Prime Minister’s visit to the UK. ““Foreign investors are looking for economies to invest in. Through this set of reforms, foreign investment flow in 32 investment points will improve,” Jaitley added.
Taking forward the announcement made in this year’s Budget, the amendments state that a manufacturer will be permitted to sell its product through wholesale and/or retail, including through e-commerce without government approval.
This means that manufacturing companies with FDI in all sectors including electronics like mobile phones will be allowed to sell on-line directly without tying up with domestic e-commerce companies.
In the defence sector, foreign investment up to 49 per cent will be under automatic route, instead of being routed through the Foreign Investment Promotion Board (FIPB). Proposals over 49 per cent will be scrutinised by the FIPB. The amendment, however, does not mention doing away with requirement of Cabinet Committee of Security (CCS) nod for proposals over 49 per cent.
FDI cap in the broadcasting sector has been raised to 100 per cent from 74 per cent for broadcasting carriage services like teleports, direct to home (DTH), cable network and mobile tv.
In broadcasting content services including FM radio and up-linking of ‘news & Government route current affairs’ TV channels, the FDI cap has been raised to 49 per cent from 24 per cent.
In addition to tea plantation, the Government has now decided to open certain up other plantation activities to 100 per cent FDI including coffee, rubber, cardamom , palm oil tree and olive oil tree plantations.
In the construction development sector, the requirements of minimum capitalization of $ 5 million within the period of six months of commencement of business and conditions of area restriction, have been removed.
In the area of single-brand retail, the Government has clarified that for ‘state-of-art’ and ‘cutting edge
technology’, the 30 per cent sourcing norms can be relaxed subject to Government approval.
The Government has also decided to allow the same entity to carry out both wholesale and single brand retail trading relaxing the current rule that an entity can’t be engaged in both activities at the same time.
In the banking sector, full fungibility of foreign investment is to be allowed in private banking sector. “Accordingly, FIIs/FPIs/QFIs, can now invest up to sectoral limit of 74 per cent, provided that there is no change of control and management of the investee company,” the Government relase said.
Certain conditions of FDI policy on agriculture and animal husbandry, and mining and mineral separation of titanium bearing minerals and ores, its value addition and integrated activities have been simplified.
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