Foreign Direct Investment (FDI) is a major driver of economic growth and a source of non-debt finance for the economic development of the country. Government has put in place an investor friendly policy on FDI, under which FDI up to 100% is permitted on the automatic route in most sectors/activities. FDI policy provisions have been progressively liberalized across various sectors in recent years to make India an attractive investment destination.
These reforms have contributed to India attracting record FDI inflows in the last 5 years. Despite the dim global picture, India continues to remain a preferred and attractive destination for global FDI flows. It is felt by the Government that the country has the potential to attract far more foreign investment which can be achieved inter-alia by further liberalizing and simplifying the FDI policy regime.
In Union Budget 2019-20, Finance Minister proposed to further consolidate the gains under FDI in order to make India a more attractive FDI destination. Accordingly, the Union Cabinet chaired by the Prime Minister Shri Narendra Modi has approved the proposal for Review of Foreign Direct Investment on various sectors.
Major Announcements and its impact and benefits:
- 100% FDI under automatic route announced for sale of coal, for coal mining activities including associated processing infrastructure in the coal sector. This will attract international players to create an efficient and competitive coal market.
- 100% FDI under automatic route announced for contract manufacturing as manufacturing through contract contributes equally to the objective of Make in India
- Local sourcing norms for FDI in Single Brand Retail Trading (SBRT) have been eased. This will lead to greater flexibility and ease of operations for SBRT entities, besides creating a level playing field for companies with higher exports in a base year. In addition, online sales prior to opening of brick and mortar stores will now be permitted, subject to the condition that the entity opens brick and mortar stores within 2 years from date of start of online retail. This brings the policy in sync with current market practices. Online sales will also lead to creation of jobs in logistics, digital payments, customer care, training and product skilling
- In case of Digital Media, it has been decided to permit 26% FDI under government route for uploading/ streaming of News & Current Affairs through Digital Media, on the lines of print media
The above amendments to the FDI Policy are meant to liberalize and simplify the FDI policy to provide ease of doing business in the country, leading to larger FDI inflows and thereby contributing to growth of investment, income and employment.
(ref: Press Release posted on pib.gov.in on August 28, 2019 by Press Information Bureau, Delhi)
