100% FDI IN SINGLE BRAND RETAIL TRADING SECTOR WILL BOOST INVESTMENTS IN INDIA

The Government made a major move to attract more foreign direct investment(FDI) into the country by relaxing FDI norms in key sectors which are as follows:

• 100 per cent FDI under automatic route in single brand retail trading (SBRT) on 10^th January, 2018. It is also likely to benefit big foreign single brand retailers such as IKEA

• It also allowed foreign airlines to invest up to 49 per cent under approval route in national carrier Air India. This move is expected to expedite the divestment process for Air India.

• 100 per cent FDI in construction development via automatic route was also cleared.

The Government permitted foreign airlines to invest up to 49 per cent in disinvestment-bound Air India and liberalised rules for foreign investment in single brand retail, construction and power exchanges.

Chandrajit Banerjee, Director General, CII said: “India continues to attract high levels of foreign direct investment. Today’s announcement includes multiple measures targeted at specific sectors where opportunities exist……the decision to permit foreign airlines to invest up to 49 percent in Air India is expected to bring some capital to support a turnaround in the national carrier.”

The Union Cabinet has decided to allow foreign investments, including from foreign airlines, to up to 49 per cent in Air India but the relaxation of FDI norms for foreign airline investment in Air India is subjected to certain conditions such as the substantial ownership and effective control of Air India shall continue to be vested in an Indian national.

Anaindya Banerjee, Currency Analyst at Kotak Securities said that “The relaxed rules will give an additional push to the rupee, which is likely to gain this year.”

New FDI norms in a SBRT sector will gain further impetus due to the process of not being subject to regulatory scrutiny and approval process.

The relaxed FDI norms should lead to further increase in foreign investment inflows and to provide ease of doing business in India.

Taruna Verma

Senior Associate