Red Carpet for FDI

India opened its doors further to foreign direct investment, diluting the stringent condition of local sourcing for single-brand retail, in continuation of measures aimed at reviving growth.

It also allowed 100% FDI in commercial coal mining and allowed as much in contract manufacturing through the automatic route, hoping to attract global vendors looking to diversify supply chains as the US and China battle it out in a trade war. Earlier, the government had issued a notification allowing 100% FDI in insurance intermediaries.

In other decisions, the Cabinet also approved a ₹6,268-crore subsidy for sugar exports, besides 75 new medical colleges.

The decisions came after the stimulus package unveiled by finance minister Nirmala Sitharaman on August 23 to help turn around the economy.

The government also allowed up to 26% FDI in digital news and current affairs media on a prior approval basis.

Single-brand retailers will now be able to start online sales before they set up brick-and-mortar stores, but will need to open these within two years. That could see the likes of Apple selling iPhones online, ahead of fully owned offline stores.

Single-brand retailers with over 51% FDI have to locally source 30% of the value of goods sold. As part of the relaxation, the target can be averaged out during the first five years, and thereafter met annually, Goyal said. All procurements made from India will be counted toward local sourcing, irrespective of whether the goods are sold in India or exported.

Sourcing of goods from India for global operations can be done directly by the entity undertaking single-brand retail or group companies — resident or non-resident — or indirectly through a third party under a legally tenable agreement.

The liberalisation in single brand retail will help generate more FDI.

Before the latest change, 100% FDI was permitted only in captive coal mining.

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