THE Union Cabinet chaired by Prime Minister Narendra Modi on Wednesday, August 28 eased rules related to flow of Foreign Direct Investment (FDI) for several sectors of Indian economy. These include single-brand retail. More than seven years after the foreign investment cap was removed for the segment to attract marquee foreign brands such as Gucci, Louis Vuitton, Ikea and others into the country. The latest government move is in line with the recent Budget announcements on FDI changes, claimed Commerce & Industry Minister Piyush Goyal. Thirty per cent local sourcing remains mandatory for single-brand retail. Besides single-brand retail, the Cabinet allowed 100 per cent FDI under automatic route in contract manufacturing and commercial coal mining and related processing infrastructure. Sourcing for contract manufacturing will also be counted towards total sourcing commitments. For the first time, the government has set an FDI cap at 26 per cent for digital news media, which till now was not covered under any foreign investment rules. Digital media companies with more than 26 per cent FDI will now be required to bring down their foreign equity level. The government has accepted the long-standing industry’s demand for making things easier for foreign retailers. Companies engaged in the single-brand trade can also start online retailing without opening brick-and-mortar stores first, something that was not allowed earlier. While 100 per cent FDI is allowed in single-brand retail, whenever the foreign investment exceeds 51 per cent, the mandatory local sourcing norm kicks in.For digital news media which till now was not covered under any foreign investment rules. Digital media companies with more than 26 per cent FDI will now be required to bring down their foreign equity level. “There’s a slowdown in the FDI situation worldwide. Even in this situation, we hope India maintains its pre-eminent position after these announcements,” Piyush Goyal said. He was briefing media on the decisions Okayed by the Union Cabinet. Investors intend to open manufacturing centers globally. ‘They are looking at India to make products for the Indian markets as well as for exports. We have till now focused on those that retail in India, but the country gets a double advantage when investors export from India. ’As for the single-brand decision, the Department for Promotion of Industry and Internal Trade (DPIIT), the nodal body for investment-related policy, will now also count local sourcing in phases. It will be counted as an average of the total value of the goods purchased by a retailer in the first five years in a single block. After that, the sourcing norms will kick in annually. “Single brand reforms will have a long-lasting impact in boosting market hygiene, enhancing customer satisfaction and most importantly raising mobile handset retail to international standards. Iconic stores of global standards have a symbolic value for the nation too”, said Pankaj Mohindroo, of India Cellular And Electronic Association. For coal mining, so far 100 per cent FDI under automatic route was only allowed for captive coal production. It has now been decided to permit 100 per cent FDI for not just commercial coal mining but for associated processing infrastructure as well, including coal washery, crushing, coal handling, and separation. “Given climate change related challenges, consumption of coal is in decline in OECD countries and even in China. Fresh investment in coal sector from global mining majors, is quite challenging going forward,” said Debashis Mishra, leader, energy, resources and industrials, Deloitte India (with inputs from The Business Standard).
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