Big FDI Moves For Single Brand Retail, Digital Media, Manufacturing

The government on Wednesday decided to relax norms for Foreign Direct Investment in several sectors including single brand retail, digital media and the manufacturing sector as part of an all-out effort to boost the flagging economy. The steps include investor-friendly policies like 30 per cent sourcing from India for single brand retailers, and legalisation of contract manufacturing to allow 100 per cent investment, said Union Minister Piyush Goel, after a cabinet meeting on Wednesday evening.

As part of the move, the centre also approved 26 per cent overseas investment in digital media for uploading and streaming of news and current affairs, on the lines of print media.

For single brand retail, the rules requiring 30 per cent local sourcing has been relaxed. Local sourcing will not be year-on-year, but instead considered as five-year blocks- which is expected to provide greater flexibility and ease of operations for the firms.

The cabinet committee headed by Prime Minister Narendra Modi has also decided that all procurements made from India by the single brand retail entity for the brand shall be counted as local sourcing.

The move - announced by finance minister Nirmala Sitharaman in the Union Budget - is also expected to be on par with current market practices. Online sales will lead to creation of jobs in logistics, digital payments, customer care, training and product skilling, the minister said.

Also, it has been proposed that five-year cap on exports will be removed, meaning the manufacturer will be able to continue to export the goods made in India.

In case of single and multi-brand retail, companies will now be able to "start online retailing before establishing a brick and mortar store," said Mr Goyal - a move that's expected to benefit firms like furniture giant IKEA.

For sale of coal, 100 per cent FDI has been allowed under the automatic route for mining and other activities including processing infrastructure, which would attract international players, the government said.

Claiming the last financial year has witnessed the largest FDI inflow, Mr Goyal said the easing and simplification of the norms will boost employment. "We see an opportunity to make India a manufacturing hub," added the minister. In 2018-19, India is expected to draw investment of around $64.3 billion.

Foreign investment is crucial for India which is hoping to double its economy to 5 trillion dollars over the next five years - a goal that makes it necessary to register at least 8 per cent growth.

But after a rapid expansion over the last couple of years, the country's growth figures have been slipping. In the January-March quarter, the GDP fall to a 20-quarter low of 5.8 per cent. Sectors like automobile,  real estate and NBFCs are experiencing a slump, with the prospect of job cuts looming large.

Earlier this week, the Reserve Bank of India approved a record Rs. 1.76 lakh crore payout -- a move that was dubbed "stealing from the RBI" by Congress leader Rahul Gandhi.

The record transfer, including a surplus of Rs. 1.23 lakh crore for 2018-19, will boost the government's finances as it tries to tackle a nearly five-year low economic growth with lakhs of estimated job cuts across sectors, and defend its ambitious target of containing fiscal deficit at 3.3 per cent of the GDP.

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