FDI reforms

The government on Tuesday announced a raft of changes in the foreign direct investment (FDI) rules for 15 sectors--including retail, defence, construction, banking and electronic media--signalling that BJP's election defeat in Bihar has not deterred it from the path of economic reforms.
The decisions come days before Prime Minister Narendra Modi leaves for the UK and Turkey , where he will interact with investors and global leaders. They are also seen as an effort to change the narrative following the BJP's embarrassing defeat in Bihar.
Although these measures have been discussed for the past few months, the decisions were cleared by the Prime Minister himself and the announcements were made before being approved by the Union Cabinet.
Sources said that some of the decisions, such as allowing 100% FDI in coffee, rubber, cardamom, palm oil and olive oil plantations, were taken at Modi's behest.
The Prime Minister also was keen to ensure that the rules provide a boost to those manufacturing locally , with sources pointing to the decision to allow “Indian manufacturers“ to retail their goods, including on e-commerce platforms, a move that will benefit the likes of Fabindia and Hidesign. Other “manufacturers“ too have been allowed to enter the retail arena without the government's approval. Apple and other “high technology“ retailers will no longer be required to mandatorily source 30% of their goods from India to comply with conditions related to single-brand retail, according to the changes in the FDI rules announced by the government. “Today's FDI related reforms will touch 15 sectors & benefit youth. Govt's commitment to development & reforms is unequivocal & unwavering... Today's reforms are another example of emphasis on minimum government, maximum governance. They will ease, rationalise & simplify processes,“ Prime Minister Narendra Modi tweeted.
The decision, coming two days after BJP's Bihar poll defeat, is seen as an attempt by the government to show its commitment to reforms and its willingness to open up the economy despite political challenges and hurdles. With its legislative agenda blocked by the Opposition in Parliament the government is seen to be moving ahead with executive decisions to boost growth and sustain the momentum that was ushered in by the massive Lok Sabha victory in May 2014.
“Reform is always an ongoing process, there is no finishing line as far as reforms are concerned,“ finance minister Arun Jaitley told reporters.
While the rules have been eased and investment limit raised for several sectors, a lot of attention has been paid to making it easier to get clearances. For instance, the Foreign Investment Promotion Board has now been allowed to clear FDI proposals of up to Rs.5,000 crore, compared to Rs.3,000 crore earlier. “The crux of these reforms is to further ease, rationalise and simplify the process of foreign investments in the country and to put more and more FDI proposals on automatic route instead of government route where time and energy of the investors is wasted,“ an official statement said. Similarly , in several cases in the so-called sensitive sectors such as defence and segments of media and e-commerce, which have traditionally viewed as sensitive, the government has done away with the need to seek its approval.

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