New Delhi: The Union Cabinet on Wednesday relaxed the foreign investment rules in single-brand retail among others and allowed foreign airlines to buy a stake of up to 49 per cent in troubled state-run carrier Air India.
The Cabinet allowed 100 per cent foreign direct investment in single-brand retail through the automatic route. It has also eased the contentious 30 per cent local sourcing norms for five years, which could allow companies like Apple to set shop in the country boosting employment in the country.
Currently, while 100 per cent FDI was allowed in single-brand retail, foreign investment beyond 49 per cent needed government permission.
As per the relaxed sourcing norms, a foreign retailer will be able to get credit from incremental increase in sourcing for its global operations from India towards the 30 per cent mandatory local sourcing requirement. After the completion of this five-year period, the retailer will be required to meet the 30 per cent sourcing norms directly towards its India’s operation.
“The move is likely to help retailers by giving them adequate time to set up their supply chain for local souring in India,” said Rajat Wahi, partner, Deloitte Touche Tohmatsu India.
The move comes shortly before Prime Minister Narendra Modi attends the World Economic Forum’s annual meeting at Davos, Switzerland, later this month where 60 head of state or government and top global CEOs will be present.
The liberalisation in FDI rules is expected to send a message to investors that India is still on the path of reforms despite growth falling to a four-year low in 2017-18 after moves like demonetisation. Mr Modi will meet around 120 CEOs of top MNCs there.
