Single brand retailers, Air India get FDI boost from Union Cabinet

Single brand retailers, Air India get FDI boost from Union Cabinet

At present, the FDI allows 49% FDI in single brand retail trading under the automatic route and beyond that, it allows up to a 100% with government approval.

The decision was taken during the Cabinet meeting chaired by Prime Minister Narendra Modi here.

The government in a press statement informed that it has permitted 100 per cent FDI under automatic route for single brand retail trading.

Besides retail, the Modi Cabinet also allowed foreign airlines to invest up to 49 per cent under the government approval route in Air India.

Once the country's monopoly airline, Air India has slowly lost market share to new low-priced private players in one of the world's fastest-growing airline markets. So far, foreign airlines were allowed to invest in Indian companies operating scheduled and non-scheduled air transport services up to the limit of 49 per cent.

India cleared a proposal on Wednesday to allow foreign investors to own up to a 49 percent stake in state-run carrier Air India, paving the way for global airlines to bid for the loss-making flagship carrier.

Earlier, foreign investments above 49 per cent required the government's approval along with subject to certain condition like mandatory local sourcing from micro and small and medium businesses (MSMEs). It has now been made a decision to permit 100% FDI under automatic route for SBRT.

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It has now been chose to do away with this provision, thereby allowing FIIs/FPIs to invest in Power Exchanges through the primary market as well.

The government said the extant policy provides for 49 per cent FDI under automatic route in Power Exchanges registered under the Central Electricity Regulatory Commission (Power Market) Regulations, 2010.

Abhishek Goenka, Leader, Direct Tax, PwC India, said in a statement, "The clarification that brokerage services are not real estate business, and hence, eligible for 100 per cent FDI under the automatic route was long overdue".

As per the existing procedures, FDI applications involving investments from countries of concern requiring security clearance are to be processed by the Home Ministry for investments falling under automatic route sectors and activities.

During 2015-16, the country received total FDI of $55.46 billion.

In the financial year 2016-17, total FDI of U.S. $ 60.08 billion has been received, which is an all-time high, read the statement issued by the government. A special objective vehicle (SPV) will be formed, in which all the real estate and artefacts belonging to the airline will be housed, according to a ministry official.

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