After incentives to perk up economy, red carpet for FDI
It allowed 100% FDI in coal mining & allowed as much in contract manufacturing through automatic route.
It also allowed 100% FDI in commercial coal mining and allowed as much in contract manufacturing through the automatic route, hoping to attract global vendors looking to diversify supply chains as the US and China battle it out in a trade war. Earlier, the government had issued a notification allowing 100% FDI in insurance intermediaries.
In other decisions on Wednesday, the Cabinet also approved a Rs 6,268-crore subsidy for sugar exports, besides 75 new medical colleges.
“The changes in FDI policy will result in making India a more attractive FDI destination,” commerce and industry minister Piyush Goyal told reporters after the Cabinet meeting chaired by Prime Minister Narendra Modi. “These will help global companies looking for alternative manufacturing hubs and help create a large number of jobs,” Goyal added.
He ruled out further liberalisation of FDI in multi-brand retail.
The decisions on Wednesday came after the stimulus package unveiled by finance minister Nirmala Sitharaman on August 23 to help turn around the economy.
Single-brand retailers will now be able to start online sales before they set up brickand-mortar stores, but will need to open these within two years. That could see the likes of Apple selling iPhones online, ahead of fully owned offline stores.
The government also allowed up to 26% FDI in digital news and current affairs media on a prior approval basis.
‘Easing Sourcing Norm a Big Step’
Single-brand retailers with over 51% FDI have to locally source 30% of the value of goods sold. As part of the relaxation, the target can be averaged out during the first five years, and thereafter met annually, Goyal said. All procurements made from India will be counted toward local sourcing, irrespective of whether the goods are sold in India or exported.
“Easing of the 30% sourcing norm by including export turnover is a big step towards attracting large brands that source products from India across categories such as apparel, shoes, soft furnishings and furniture,” said Rajat Wahi, partner, Deloitte India.
Sourcing of goods from India for global operations can be done directly by the entity undertaking single-brand retail or group companies — resident or nonresident — or indirectly through a third party under a legally tenable agreement.
The liberalisation in singlebrand retail will help generate more FDI.
“The flexibility in devising the India sourcing strategy should attract more brands into the country, resulting in more local manufacturing and exports, which has been the original intent of the policy,” said Akash Gupt, partner, PwC.
Before the latest change, 100% FDI was permitted only in captive coal mining.
“It has been decided to permit 100% FDI under automatic route for sale of coal, for coal mining activities including associated processing infrastructure,” an official statement said. Allowing 100% FDI in commercial coal mining is expected to draw independent miners, helping raise investment and output.
To provide clarity on contract manufacturing, the Cabinet decided to allow 100% FDI under the automatic route. There is currently no specific provision for contract manufacturing in the FDI policy.
Welcoming the decision to allow 100% FDI in commercial coal mining as “another progressive step by the government”, Vedanta Resources chairman Anil Agarwal said, “This will send a positive signal to global investors and give a significant push to the economy to help it reach the $5-trillion mark.”