The Narendra Modi government is planning the next big round of foreign direct investment (FDI) liberalisation, which could have significant implications for several sectors, including print media and retail.
Economic ministries are learnt to be working onaproposal to step up the FDI limit in print news media to 49 per cent, from the current cap of 26 per cent. Also, there are plans to allow singlebrand retail companies with up to 100 per cent FDI to go through the automatic clearance route.
Adraft Cabinet note on phasing out the Foreign Investment Promotion Board (FIPB) is already in the making and could be ready for approval by the Union Cabinet by the end of April.
FDI rules could be eased subsequently in some of the sectors.
“Successive governments have done all they can in raising FDI limits across sectors.
Further liberalisation can now happen through easing the rules governing approval routes,” saidasenior government official, aware of the interministerial deliberations.
Print news media could be an exception where talks are on to relax the level of FDI, the official said.
The person added that while the bureaucracy has no issues with the proposal to raise sectoral cap to 49 per cent from the existing 26 per cent in print media, it could face political hurdles.
The proposal will be pursued further, the official said.
For singlebrand retail, while 100 per cent FDI is allowed, 49 per cent is through automatic route and beyond that is FIPB approval route.
Asecond official saidaproposal to allow 100 per cent FDI through the automatic route, provided the domestic sourcing norms are met, will be taken up soon.
If suchaproposal is accepted by the government, it could mean companies like Apple and Zara can sell in India through whollyowned subsidiaries, without going through the clearance bottlenecks.
Business Standard has also learnt the draft cabinet note for bringing the curtain down on FIPB states FDI proposals which require approval will be given by either sectoral regulators or line ministries.
FIPB will not be replaced by another body, officials said.
In his 201718 Budget, Finance Minister Arun Jaitley had announced the dismantling of FIPB.
“In the meantime, further liberalisation of FDI policy is under consideration and necessary announcements will be made in due course,” he had said.
The draft Cabinet note has been circulated by the finance ministry to other departments for comments.
While initially there wasaproposal to let the licensing bodies approve new investments, stakeholders from domestic industry had complained of the long time required by such bodies to provide even licences.
Hence these bodies could likely be ruled out. FIPB had the final say in approving FDI proposals in the country till now, other than proposals exceeding ~5,000 crore which are cleared by the Cabinet Committee on Economic Affairs.
Sectors where industry players have asked for further easing of rules include aviation, defence and pharmaceuticals.
The government had allowed up to 100 per cent FDI in defence through the approval route, over the 49 per cent investments currently open under the automatic route.
For brownfield projects in the pharmaceutical sector, automatic approval had been extended to 74 per cent.
These are likely to be unchanged.
Adraft Cabinet note on phasing out the Foreign Investment Promotion Board (FIPB) is already in the making and could be ready for approval by the Union Cabinet by the end of April.
FDI rules could be eased subsequently in some of the sectors.
“Successive governments have done all they can in raising FDI limits across sectors.
Further liberalisation can now happen through easing the rules governing approval routes,” saidasenior government official, aware of the interministerial deliberations.
Print news media could be an exception where talks are on to relax the level of FDI, the official said.
The person added that while the bureaucracy has no issues with the proposal to raise sectoral cap to 49 per cent from the existing 26 per cent in print media, it could face political hurdles.
The proposal will be pursued further, the official said.
For singlebrand retail, while 100 per cent FDI is allowed, 49 per cent is through automatic route and beyond that is FIPB approval route.
Asecond official saidaproposal to allow 100 per cent FDI through the automatic route, provided the domestic sourcing norms are met, will be taken up soon.
If suchaproposal is accepted by the government, it could mean companies like Apple and Zara can sell in India through whollyowned subsidiaries, without going through the clearance bottlenecks.
Business Standard has also learnt the draft cabinet note for bringing the curtain down on FIPB states FDI proposals which require approval will be given by either sectoral regulators or line ministries.
FIPB will not be replaced by another body, officials said.
In his 201718 Budget, Finance Minister Arun Jaitley had announced the dismantling of FIPB.
“In the meantime, further liberalisation of FDI policy is under consideration and necessary announcements will be made in due course,” he had said.
The draft Cabinet note has been circulated by the finance ministry to other departments for comments.
While initially there wasaproposal to let the licensing bodies approve new investments, stakeholders from domestic industry had complained of the long time required by such bodies to provide even licences.
Hence these bodies could likely be ruled out. FIPB had the final say in approving FDI proposals in the country till now, other than proposals exceeding ~5,000 crore which are cleared by the Cabinet Committee on Economic Affairs.
Sectors where industry players have asked for further easing of rules include aviation, defence and pharmaceuticals.
The government had allowed up to 100 per cent FDI in defence through the approval route, over the 49 per cent investments currently open under the automatic route.
For brownfield projects in the pharmaceutical sector, automatic approval had been extended to 74 per cent.
These are likely to be unchanged.
ON THE CARDS
- Govt may increase FDI cap in print media to 49% from 26%
- FDI cap increases in other sectors ruled out
- FDI rules on approval could be eased in other sectors as well
- Currently, 49% FDI is allowed in singlebrand retail via the automatic route .
Business Standard New Delhi,17th March 2017
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