It has been felt that the country has potential to attract far more foreign investment which can be achieved by further liberalizing and simplifying the FDI regime. Foreign airlines are already allowed to own up to 49% of private airlines in India but were restricted from investing in the state-run carrier, which.
By allowing 49% FDI in Air India, the government will likely get more bidders and hence a better valuation. And to expedite such privatisation move, the government has now made this announcement of permitting 49 per cent FDI.
Regarding the liberalisation in the construction development segment, the government has chose to clarify that real estate broking service does not amount to real estate business and is therefore, eligible for 100 per cent FDI under automatic route.
For single brand retail trading, there is no approval required of the Government for 100% FDI.
These include any instrument, apparatus, appliance, implant, material or other articles, whether used alone or in combination, plus any software tool, intended by its manufacturer to be used especially for human beings or animals for diagnosis, prevention, monitoring, treatment or alleviation of any disease or disorder.
Relaxing a procedural requirement, the government said it has now been decided that for investments in automatic route sectors, requiring approval only on the matter of investment being from country of concern (that is Pakistan and Bangladesh), FDI applications would be processed by the DIPP for government nod.
Regarding the decision of the government of allowing 100 per cent FDI in single-brand retail trade, the CITU-the trade union of the CPI (M) - condemned the move and said that the decision would increase the hardship of traditional retail market.
Allowing incremental sourcing undertaken by overseas companies to be counted towards the 30% sourcing commitment for the initial five years will provide them with the flexibility and time to align their retail and sourcing business in India.
"Global brands across different categories, from apparel to electronics to accessories will be aided through this, providing further options to Indian consumers and improving India?s ranking in ease of doing business", Rajat Wahi, Partner, Deloitte India said.
It is obvious that it is the slowing of the economy, post-demonetisation, that has prompted the government to accelerate the process of divestment and liberalise FDI norms on a large scale. "This remains an unfinished agenda".