In a major push for foreign direct investment in key areas, the Union Cabinet on Wednesday approved 100 per cent FDI in single brand retail and construction sector and also opened the doors for foreign investment in the debt-ridden national carrier, Air India.

Under the plan, foreign airlines will be able to buy stake up to 49 per cent in Air India. The government, however, clarified that substantial ownership and effective control of Air India shall continue to be vested in Indian nationals.

“Foreign investments in Air India including that of foreign airlines shall not exceed 49 per cent either directly or indirectly,” the government said in a statement. Existing rules allow foreign airlines to own as much as 49 per cent in an Indian airline, with the exception of Air India. “The process of disinvestment is proceeding expeditiously,” R N Choubey, Civil Aviation Secretary said.

The changes will allow a foreign airline like Singapore Airlines to bid for the airline forming a joint venture with Tata Sons in which the Tatas own a majority stake. The two entities already own Vistara in a similar arrangement. Earlier, Leslie Thng, Chief executive officer of Vistara had said that Singapore Airlines will consider the prospect of bidding for Air India. Air India had a total debt of about Rs 48,877 crore at the end of March 2017, of which about Rs 17,360 crore were aircraft loans and Rs 31,517 crore were working capital loans. The Civil Aviation Ministry said it would invite expressions of interest in buying Air India after the budget.

The Cabinet also approved 100 per cent FDI in single-brand retail through automatic route. It tweaked the local sourcing norm by allowing such entities to meet the mandatory 30 per cent local sourcing norm incrementally within a period of five years of opening their first store in India.

The Confederation of All India Traders (CAIT) objected to the government’s move to allow 100 per cent FDI in single-brand retail, saying the decision would lead to an easy entry for multi-national companies and harm domestic trade. “It’s a serious matter for small businesses. It is a pity that instead of formulating policies for the welfare, up-gradation and modernisation of existing retail trade, the government is more interested in paving way for the MNCs to control and dominate the retail trade of India,” Praveen Khandelwal, national secretary general of CAIT, said.

Randeep Singh Surjewala, senior Congress spokesperson, said, “As BJP government allows 100 per cent FDI in single brand retail by doing away the requirement of 30 per cent sourcing through ‘Make in India’, PM & FM’s duplicity & doublespeak stand exposed. Modiji’s professed ‘harm of manufacturing & traders’ & Jaitleyji’s ‘last breath’ have proved to be ‘Jumlas’!,” he tweeted.

But the government said “these are intended to liberalise and simplify the FDI policy so as to provide ease of doing business in the country”.

FDI is a major driver of economic growth and a source of non-debt finance for the economic development of the country. During 2014-15, total FDI inflows received were $45.15 billion as against $36.05 billion in 2013-14.