The Union Cabinet at a meet chaired by Prime Minister Narendra Modi on Wednesday allowed 100% Foreign Direct Investment ( FDI) under the automatic route in single brand retail trading (SBRT) and construction development . The Cabinet also approved investment up to 49% under approval route in Air India.

Highlights: 

1. 100% FDI under automatic route for Single Brand Retail Trading
2. 100% FDI under automatic route in Construction Development
3. Foreign airlines allowed to invest up to 49% under approval route in Air India
4. FIIs/FPIs allowed to invest in Power Exchanges through primary market
5. Definition of ‘medical devices’ amended in the FDI Policy

Single Brand Retail Trading (SBRT):

Extant FDI policy on SBRT allows 49% FDI under automatic route, and FDI beyond 49% and up to 100% through Government approval route. It has now been decided to permit 100% FDI under automatic route for SBRT.

It has been decided to permit single brand retail trading entity to set off its incremental sourcing of goods from India for global operations during initial 5 years, beginning 1 April of the year of the opening of first store against the mandatory sourcing requirement of 30% of purchases from India.

After completion of this 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.

Civil aviation:

As per the extant policy, foreign airlines are allowed to invest under Government approval route in the capital of Indian companies operating scheduled and non-scheduled air transport services, up to the limit of 49% of their paid-up capital.

However, this provision was presently not applicable to Air India, thereby implying that foreign airlines could not invest in Air India.

It has now been decided to do away with this restriction and allow foreign airlines to invest up to 49% under approval route in Air India subject to the conditions that; Foreign investment(s) in Air India including that of foreign Airline(s) shall not exceed 49% either directly or indirectly. Substantial ownership and effective control of Air India shall continue to be vested in Indian National.

Constructional development:

It has been decided to clarify that real-estate broking service does not amount to real estate business and is therefore, eligible for 100% FDI under automatic route.

Power exchanges:

Extant policy provides for 49% FDI under automatic route in Power Exchanges registered under the Central Electricity Regulatory Commission (Power Market) Regulations, 2010. However, FII/FPI purchases were restricted to secondary market only. It has now been decided to do away with this provision, thereby allowing FIIs/FPIs to invest in Power Exchanges through primary market as well.

Pharmaceuticals: 

FDI policy on Pharmaceuticals sector inter-alia provides that definition of medical device as contained in the FDI Policy would be subject to amendment in the Drugs and Cosmetics Act. As the definition as contained in the policy is complete in itself, it has been decided to drop the reference to Drugs and Cosmetics Act from FDI policy. Further, it has also been decided to amend the definition of ‘medical devices’ as contained in the FDI Policy.

(With agency inputs)