Attracting Foreign Direct Investment, Driving Economic Growth
The Government’s FDI policy can be summed up by our Prime Minister’s promise of “red carpet, not red tape” for investors. The FDI norms in various sectors have been liberalised since the government came into power and the results have been extremely encouraging.
It is important to note that the extant FDI policy does allow 100% FDI for Single Brand Retail Trading through the Government approval route. The decision to allow 100% FDI under automatic route is aimed at greater ease of doing business in India. It will save companies from submitting voluminous levels of paperwork and the subsequent task of getting approvals, which can take several months. Along with this, the government has also eased the local sourcing norms for the ﬁrst ﬁve years to ensure that the retail outlets can function smoothly and optimise their operations. This will lead to an increase in healthy competition within the industry as well.
The Cabinet has also taken a step towards easing the disinvestment process of Air India by allowing foreign airlines to invest up to 49% under the Government approval route. This is expected to bring the ﬁnancial muscle and expertise required to support a turnaround in the national carrier.
Another important decision was to clarify that real-estate broking service does not amount to real estate business and is therefore, eligible for 100% FDI under automatic route. The move will enable international brokerage companies set up their own subsidiaries here. This would create more jobs and oﬀer professional services to property buyers.
FDI is a very important driver of economic growth and a source of non-debt ﬁnance for an economy. These reforms will boost India’s attractiveness as an investment destination and contribute to growth in income and employment.