The Union Cabinet has set the ball rolling for the next set of reforms by easing FDI rules in many sectors.
- At a time when the world is in the grip of the US-China trade war, India which is reeling under economic slow down is trying to get the crucial Foreign Direct Investments (FDI) into the country.
- The Union Cabinet has eased FDI rules for many sectors offering an automatic route for investments, easing local sourcing norms for single-brand retail companies.
- While the current norms call on single-brand retail companies with more than 51% FDI to source 30% of their goods locally, the new norms allow companies to calculate this 30% sourcing over first five years period of operation.
- Also, sourcing for exports will also count as local sourcing.
- The decision will benefit companies like Apple which is looking to set up its own chain of stores in the country.
- Under the current norms, 100% FDI in the manufacturing sector is allowed but there is no specific policy towards contract manufacturing. The new norms allow for 100% FDI in contract manufacturing. This will boost domestic manufacturing.
- The Cabinet also allowed 100% FDI under automatic route in coal mining, sale of coal and associated infrastructure activities such as washery, crushing, and coal handling. This is to attract international players into the sector and create a competitive environment.
- Currently, 100% FDI is allowed in coal and lignite mining for captive consumption only.
- Experts believe that the move in allowing FDI in coal selling and its associated infrastructure is a good move and the policy will reap benefits in 4-5 years time if the government begins the auction of coal mines now.
With the new norms, the government has also enhanced the ease of doing business in the country especially for single-brand retails enterprises. Big global names like Apple have not opened their retail outlets owing to the local sourcing norms. Now this will change and huge FDI is expected from global single-brand retail giants.