In a clear signal of not going back on its reform decisions, the Government on Thursday notified 51 per cent foreign direct investment in multi-brand retail, paving way for players such as Carrefour and Walmart to enter India.
It also approved foreign investment in the cash-strapped aviation industry and broadcasting.
At the same time, the Government has not made any change in the definition of micro, small and medium enterprises (MSME) for sourcing. It has stipulated a five-year timeframe for fulfilling 30 per cent sourcing norm, after which it has to be on an annual basis.
Last Friday, the Government had announced a slew of reforms, including opening up the supermarket sector to foreign chains and allowing foreign investment in airlines and broadcasting, amidst much brickbats from Opposition and even its own allies.
It also approved the sale of stakes in four state-run companies countering charges of policy paralysis.
With the Cabinet decision being notified, interested parties can file new applications for investment through Foreign Investment Promotion Board.
The notification will allow major retail chains like Walmart to hold majority stake in a local partner and also sell directly to consumers. India’s retail business is estimated between $450 and $600 billion and is growing at over 20 per cent on CAGR basis. Previously, 100 per cent FDI was allowed in cash and carry. The Government has time and again said that opening up of the retail sector will improve the farm-to-fork efficiency, besides building backend infrastructure like cold chain. The move will eliminate middlemen and also help in taming inflation, it said.
However, opening up of the retail sector will come with strict riders.
Foreign retailers will only be allowed to set up shop in cities with a population of more than 1 million, and must source at least 30 per cent of the goods from local and small industries.
The State Governments will have the freedom to decide whether to allow the supermarkets on their patch and the minimum investment will be $100 million, Commerce Minister Anand Sharma said.
The Cabinet had also allowed the FDI limit to go up to 74 per cent in broadcasting carriage services that include Direct-to- Home (DTH), digital cable networks and teleports, besides mobile television to help bring in the much needed investments as the industry is gearing up for digitisation.
Foreign airlines can now pick up 49 per cent stake in India’s domestic carriers, a step that is expected to give a boost to the cash-strapped aviation industry. Current FDI norms allow foreign investors, not related to airline business, to directly or indirectly own an equity stake of up to 49 per cent in Indian carrier.
The Government decision to allow foreign direct investments up to 49 per cent in power exchanges has also been notified.