Year 2018 being the last year when the existing government would bring its full fledged budget before the upcoming elections in 2019. In continuation of its efforts, the Union Cabinet further simplified the Foreign Direct Investment (FDI) Policy to provide an ease of Doing Business in India. With these amendments, government has removed entry barriers in single brand retail companies concerns regarding local sourcing and FDI in multi-brand retail still need to be looked upon. A brief of the recent decisions are summarized as follows:
1. Single Brand Retail Trading (SBRT)
Existing policy allows 49% FDI under Automatic Route. Beyond 49% and upto 100%, FDI was allowed under Government Approval Route. Following changes have been approved:
- Government approval no longer required for FDI in SBRT
- Non-resident entity can be the brand owner or it can also operate otherwise
- Specific brands can be traded directly by the Brand Owner or through legally tenable agreement executed between any Indian entity & the Brand owner
- Incremental sourcing of goods from India for global operations can be set off during initial 5 years
- After completion of initial 5 year period, the SBRT entity shall be required to meet the 30% sourcing norms directly towards its India’s operation, on an annual basis.
2. Civil Aviation
Foreign Airlines were allowed to invest upto 49% in Indian companies operating scheduled and non-scheduled air transport services except in Air India. The following changes have been introduced:
- Foreign airlines can invest up to 49% under approval route in Air India. Total FDI directly or indirectly not to exceed 49%
- Substantial ownership and effective control of Air India shall continue to be vested in Indian National.
3. Other Important Changes
- It’s clarified that the real-estate broking service does not amount to real estate business and is therefore, eligible for 100% FDI under automatic route.
- It has now been decided that issue of shares against non-cash considerations like pre-incorporation expenses, import of machinery etc. shall be permitted under automatic route in case of sectors under automatic route.
- Definition of ‘medical devices’ to be amended as contained in the current FDI Policy. Earlier a reference was sought from Drugs and Cosmetics Act which is not required now.
- Wherever required FDI applications would be processed by Department of Industrial Policy & Promotion (DIPP) for Government approval
About Author: With over 15 years of experience, Shashi Mohan has been responsible for the set up and operational management of over 150 overseas brands in India.
Contact: firstname.lastname@example.org or +91 9818700482
Shashi is also a Co-Founder at Excelor India Cons. Pvt. Ltd, www.excelorindia.com
Keywords: Doing Business in India, Investing in India, India Civil Aviation Opportunities
Keyphrases: doing business in india, retail business in India, Investing in India