This Article is From Sep 15, 2012

Govt allows FDI in multi-brand retail, aviation: Top 10 developments

The UPA government has begun to shed its policy paralysis, introducing the boldest reforms yet in its second term today by allowing foreign super-market chains to enter India and foreign airlines to invest in Indian carriers. Industry is cheering; ally Mamata Banerjee has threatened once again to withdraw support.

Here are 10 developments:

  1. The government has allowed 51% foreign direct investment or FDI in multi-brand retail. This means that foreign super market chains can now set up deep-discount stores in India. Late last year, the cabinet had allowed FDI in multi-brand retail, but suspended its plans after Ms Banerjee threatened to pull out of the Congress-led UPA coalition at the Centre.

  2. It has relaxed rules to allow foreign airlines to invest up to 49% in Indian carriers. Till now any foreign company except an airline could buy stake upto 49 per cent in an Indian airline.  This move expected to help bring much-needed cash flow to India's bleeding private airlines.

  3. The Cabinet Committee on Economic Affairs also hiked the cap on foreign investment in the broadcast sector to 74 per cent. Earlier, 49 per cent FDI was allowed in cable TV and direct-to-home segments, and 74 per cent in head-end in the Sky (HITS).

  4. In the slew of reforms that it announced, the government also approved sale of its minority stakes in four public sector firms -- Hindustan Copper, Oil India, MMTC and Nalco-- to raise up to Rs. 15,000 crore. The government in the last fiscal could raise only Rs. 14,000 crore from disinvestment against the target of Rs. 40,000 crore.

  5. Prime Minister Manmohan Singh's office tweeted this evening, "The Cabinet has taken many decisions today to bolster economic growth and make India a more attractive destination for foreign investment." It also tweeted on the PM's behalf, "I believe that these steps will help strengthen our growth process and generate employment in these difficult times."

  6. Today's big bang reforms came a day after the government took the politically tough decision to hike the price of diesel by Rs 5 per litre and also capped the supply of subsidised liquefied petroleum gas (LPG) cylinders to six per household.

  7. Mamata Banerjee is reportedly furious and will decide on Tuesday whether to exit the ruling coalition - a threat issued by her party today. She wants the decisions on fuel and FDI in multi-brand retail rolled back. The Trinamool Congress, which rules West Bengal, has said it will not implement FDI in multi-brand retail in the state.

  8. The Congress-ruled Kerala has also said it will not implement FDI in multi-brand retail.  The Jayalalithaa-led Tamil Nadu government has also refused.   Bihar Chief Minister Nitish Kumar also criticised the decision, saying it's 'suicidal step' by the Centre and 'it seems the Manmohan Singh government has realised that it's time to leave; so every day they 're taking a suicidal step.'

  9. Commerce Minister Anand Sharma has pointed out that states have the right to reject the multi-brand reforms. "It is an enabling legislation," he said, adding that," while we respect Mamata Banerjee's prerogative to implement or not implement...equally it is the prerogative of other states to have it."  

  10. Industry and markets have cheered the signal that the government has shed its policy paralysis. Anticipating reforms, the Sensex clocked the biggest one-day gain in 10 months. The BSE benchmark index closed at 18,464.27, up 443 points or 2.46 per cent -- a 14-month high.



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