Millennium Post

PM takes FDI route to ‘go down fighting’

Prime Minister Manmohan Singh is back in action, as his cabinet rejigged the financial policy of the government that can have far-reaching implications. On Friday, it okayed foreign direct investment [FDI] in key sectors, like multi-brand retail trading [MBRT] and aviation. The union cabinet approved the proposal to allow 51 per cent FDI in MBRT, but left it to state governments to allow setting up of such stores. This proposal was deferred in November last year due to political opposition, including from the key Congress ally Trinamool Congress.

These decisions split the states on party lines. Announcing this decision, the commerce and industry minister Anand Sharma said that the government had tried to build consensus on the issue of allowing FDI in multi-brand retail. The minister claimed that the majority of state governments, including Andhra Pradesh, Haryana, Delhi and Maharashtra were in favour of allowing overseas investments. These states are either ruled by the Congress or have it as a ruling ally. He added that Odisha, Bihar and West Bengal were opposed to the move.

The proposal approved by the Cabinet Committee on Economic Affairs [CCEA] encapsulates that retail outlets can be set up in cities with a population of more than 10 lakh as per the 2011 census. Changing the norms of single-brand retail, the cabinet decided that any firm seeking waiver of the mandatory 30 per cent local-sourcing policy would have to set up a manufacturing facility in the country.

The CCEA also permitted foreign airlines to make investment up to 49 per cent in India's domestic carriers. Coming as a huge relief to private airlines in India, this proposal can pave way for foreign investment in the troubled domestic airlines in need of funds.

After the meet, the civil aviation minister Ajit Singh told reporters, 'The cabinet today approved the proposal of allowing foreign airlines to pick up to 49 per cent stakes in Indian carrier. Though FDI of up to 49 per cent, 75 per cent and 100 per cent was there in aviation sector, foreign airlines were not allowed.'

Other than these two colossal decisions, the cabinet also cleared the restructuring of Prasar Bharati. As per the proposal, the cabinet has approved 100 per cent expenses towards salary and salary-related expenses of Prasar Bharati for next five years.


Industry lobbies welcomed the government’s decision to allow up to 51 per cent foreign direct investment [FDI] in multi-brand retail and said that the move has indicated that reforms were back.

‘The decision of the government to ease FDI norms in an array of sectors like multi brand retail, civil aviation, power trading exchanges and broadcasting is a tremendous boost not only to the sectors in question, but is a huge mood lifter,’ the Confederation of Indian Industry [CII] said in a statement.

‘The move to increase FDI caps in in these sectors will help mobilise capital into these sectors, which the country needs and would also improve the current account deficit situation, which was becoming alarming. Purely, from a policy point of view as well, Thursday’s announcements followed by Friday’s are an indication that reforms are back,’ it added.

The Federation of Chambers of Commerce and Industry [FICCI] said the decision reflected the resolve of the government to usher in a retail revolution in the country and signalled to the investor community that India is committed to furthering reforms.

‘We will see infusion of new technology across the agriculture value chain,’ said R V Kanoria, president of the chamber.
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