49 per cent FDI allowed for Air India

Experts hope the reforms will boost the retail sector after slowdown.

New Delhi: The Cabinet on Wednesday decided to bring Air India at par with private airlines operating in the country by allowing foreign airlines to invest up to 49 per cent in the national carrier.

However, substantial ownership and effective control of Air India will remain vested in Indian nationals. The move will allow foreign airlines to bid for a stake in Air India, which the government is planning to divest.

The Cabinet decided to clarify that real-estate broking service does not amount to real estate business, and is therefore, eligible for 100 per cent FDI under the automatic route.

Foreign investment rules have also been liberalised in case of power exchanges, an online platform where electricity is traded. Currently, the policy provides for 49 per cent FDI under the automatic route in power exchanges. However, FIIs’ purchases were restricted to the secondary market only.

“It has now been decided to do away with this provision, thereby allowing FIIs/FPIs to invest in power exchanges through the primary market as well,” said an official statement.

The Cabinet also relaxed the FDI policy for medical devices and audit firms associated with companies that get overseas funds.

As per the existing procedures, FDI proposals under the automatic route from countries of concern (Pakistan and Bangladesh) are processed by the Union home ministry. It has now been decided that such proposals would be processed by the department of industrial policy and promotion. However, cases under the government approval route, also requiring security clearance with respect to countries of concern, will continue to be processed by the concerned administrative department.

Meanwhile, experts hailed the move to allow 100 per cent FDI under the automatic route for single brand retail. “The timing for this announcement is significant as the retail sector is poised to receive significant real estate supply in the near future. After a prolonged period of slowdown in the retail sector over the last few years, we saw strong comeback with developers and investors betting high on the sector. Retail sector saw significant increase in private equity (PE) investments in FY17 indicating a significant growth potential in the sector in the coming years. The announcement in favour of 100 per cent FDI through direct route will open up India as a global retail market,” said Pankaj Renjhen, MD, retail, JLL India.

However, Aashish Kasad of EY India said the industry is disappointed with no changes in FDI norms for multi-brand retail which his needed to get latest tech.

( Source : Deccan Chronicle. )
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