After years of opposing any foreign investment in multi-brand retail, the Indian government will likely ease foreign direct investment (FDI) rules for several sectors if they agree to sell more locally produced goods. The government has been slowly liberalizing the FDI for the last two years to attract foreign capital to the country. The government last year relaxed FDI standards in many sectors, including defense, civil aviation, construction and development, private security agencies etc.
In India Foreign Direct Investment (FDI) flows into two ways, the automatic route and through government approval. FIPB deals with the latter. The sectors which do not come under the automatic route require approval of the Foreign Investment Promotion Board. However sectors which come under the automatic route require no approval from the FIPB.
The former government has allowed up to 51 percent FDI in multi-brand retail. The BJP government has kept the policy untouched but last year, they have allowed up to 100 percent FDI in multi-brand food retail only if the products sold are manufactured in India.
In the budget speech, finance minister Arun Jaitley had announced the government’s intent to ease foreign direct investment rules. He has also pointed out that presently over 90 per cent of total FDI inflows are through the automatic route and only 10 per cent has to go through the Foreign Investment Promotion Board (FIPB). Further he added that we have now reached a stage where FIPB can be phased out.
March 27, 2017