After tax incentives, Centre brings big FDI reforms in manufacturing, digital media, single-brand retail - The Statesman

After tax incentives, Centre brings big FDI reforms in manufacturing, digital media, single-brand retail


Union Railways and Commerce Minister Piyush Goyal along with Union Environment, Forest and Climate Change and Information and Broadcasting Minister Prakash Javadekar, during a Cabinet Briefing in New Delhi. (Photo: IANS)

In a major reform push, the Union Cabinet on Wednesday eased foreign direct investment (FDI) norms in several sectors, including approval of 100 per cent FDI in coal mining and contractual manufacturing, as it looks to boost economic growth from a five-year low.

The Modi government has approved 100 per cent FDI in coal mining and associated infrastructure.

“It has been decided to permit 100 per cent FDI under automatic route for sale of coal, for coal mining activities including associated processing infrastructure subject to provisions of Coal Mines Act, 2015 and the Mines and Minerals Act, 1957,” an official statement said.


“Associated processing infrastructure” would include coal washeries, crushing, coal handling, and separation (magnetic and non-magnetic).

As per the present FDI policy, 100 per cent FDI under automatic route is allowed for coal and lignite mining for captive consumption by power projects, iron and steel and cement units and other eligible activities permitted under and subject to applicable laws and regulations.

Union Minister Piyush Goyal said that the Cabinet has allowed 100 per cent FDI in Contract Manufacturing through the automatic route.

An official statement said that the decision has been taken to in order to provide clarity on contract manufacturing in the country.

“Subject to the provisions of the FDI policy, foreign investment in ‘manufacturing’ sector is under the automatic route. Manufacturing activities may be conducted either by the investee entity or through contract manufacturing in India under a legally tenable contract, whether on ‘Principal to Principal’ or ‘Principal to Agent’ basis,” the Commerce Minister statement said.

In a significant boost for the fast-growing digital media space, the cabinet approved 26 per cent FDI in digital media with government approval.

Currently, 49 per cent FDI is provided under the approval route in news channels and the government has now decided to expand the span of FDI to the digital media space.

“The extant FDI policy provides for 49 per cent FDI under approval route in up-linking of ‘News & Current Affairs’ TV channels. It has been decided to permit 26 per cent FDI under government route for uploading or streaming of news and current affairs through digital media, on the lines of print media,” an official statement said.

The Narendra Modi cabinet also eased the 30 per cent local sourcing norm in single-brand retail (SBRT) where domestic procurement for exported goods will now qualify for inclusion under the 30 per cent sourcing rules.

“With a view to provide greater flexibility and ease of operations to SBRT entities, it has been decided that all procurements made from India by the SBRT entity for that single brand shall be counted towards local sourcing, irrespective of whether the goods procured are sold in India or exported,” Commerce Minister Goyal told reporters after the cabinet meeting.

“Further, the current cap of considering exports for 5 years only is proposed to be removed, to give an impetus to exports,” he added.

The extant FDI policy provides that 30 per cent of the value of goods have to be procured from India if the SBRT entity has more than 51 per cent FDI. Besides, the local sourcing requirement can be met as an average during the first 5 years, and, thereafter, annually.

The Union Cabinet has also approved 75 new medical colleges, to be established by 2021-22. This is a move to add 15,700 MBBS seats in the country.

The Union Cabinet has further approved Sugar export policy for the evacuation of surplus stocks during sugar season 2019-20. Nearly 60 lakh tonnes of sugar will be exported in this financial year.

The Government has also approved the establishment of an international Coalition for Disaster Resilient Infrastructure (CDRI). Prime Minister Narendra Modi will launch the CDRI at the UN Climate Summit in New York on September 23.

On Friday, Sitharaman had announced tax incentives and some reforms across a variety of sectors in an effort to stimulate slowing economic growth.

After rapidly expanding in the last couple of years, India’s economic growth momentum has been slipping since the last 3-4 quarters. Not only did GDP growth fall to a 20-quarter low of 5.8 per cent in January-March, but telltale signs of distress are also visible in sectors like NBFCs, automobile, real estate, and FMCG.

To pull out the economy from the current slump, the finance minister provided tax relief for foreign portfolio investors (FPIs) and startups coupled with targeted steps for the automobile sector and upfront support of Rs 70,000 crore to public sector banks with an aim to revive demand conditions.

Goyal said decisions of the Cabinet on Wednesday are aimed 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 the growth of investment, income and employment”.

FDI is a major driver of economic growth and a source of non-debt finance for the economic development of the country. The government has put in place an investor-friendly policy on FDI, under which investment up to 100 per cent is permitted on the automatic route in most sectors/ activities.

These reforms have led to total FDI into India reaching USD 286 billion in five years from 2014-15 to 2018-19 as compared to USD 189 billion in the previous five-years, he said. At USD 64.37 billion, FDI in 2018-19 is the highest ever investment received for any financial year.