Government of India is under a process of making Indian
laws and rules at their best and for the benefit of people; the government has
in its tenure amended various act and has introduced many scheme and rules for
the purpose of better corporate governance.
Our finance minister has recently issued a press release
proposing some significant changes to FDI (i.e. Foreign Direct Investment) policy
on 28th August, 2019, for the growth of our economy as a whole;
highlights of which are tabled below:
Government
announces FDI Reforms in various sectors to boost Economy
|
GeM
& SIDBI sign MoU to enable growth of MSMEs, Start-ups and Women
Entrepreneurs
|
Government
approves Rs 6,268 crore subsidy to promote sugar exports
|
Commerce
Minister reviewed the status of Special Economic Zone (SEZ) of Maharashtra
|
Homemade
agarbattis to create jobs: Government curbs import of incense sticks
|
Commerce
Minister stresses importance of circular economy
|
1. Initially under the existing policy for Single Brand Retail Trading, 100 % FDI was allowed under the automatic route, for
which one person was required to comply with condition that 30% of the value of
goods has to be procured from India, if SBRT entity has FDI of more than 51%. Now with new reforms the government proposed to remove few
conditions stated below:
·
Single Brand Retail
Trading entity is now allowed to commence its Online Retail Sales without
opening its physical store. But the physical stores needs to be opened within 2
years from date of start of online trading. The government expects to create
more jobs with online trading and has given a support wall to SBRT entities to
undertake online sales prior to having a physical presence in India.
·
In order to boost up
the exports it is now proposed that the goods sourced could be sold in India or
be exported. This has further clarified the end use of the sourced goods that
was missing in extant policy.
·
One of the major hurdles
for Single Brand Retail Trading entity was Local Sourcing, wherein it has been
proposed to remove the time limit of 5 years for meeting this requirement. Further
it has been clarified that all procurements that will be made by Single Brand
Retail Trading entities from India, shall be counted towards “Local Sourcing”
·
The amendment will
introduce further flexibility by allowing the entire sourcing of goods from
India for global operations that will be directly undertaken by the Single
Brand Retail Trading entity or its group companies both resident and non-resident
or even indirectly through third party under a legally enforceable agreement
(which will be accounted towards local sourcing)
·
It has been further
proposed that entire sourcing from India for global operations (and not just
for the incremental value) will be counted towards local sourcing requirement.
This move will eliminate discrimination which was faced by companies with lower
exports as against companies with consistently high exports
·
Benefit is that Single
Brand Retail Trading entities will invest more in India by reduction of such
strict regulations.
2. Digital Media: Under
existing legal framework 26% FDI under approval route was allowed for
uploading/ streaming of "news and current affairs" through print
media like publishing of newspaper and periodicals dealing with news and
current affairs;
In respect of up-linking of 'news and current
affairs' through television channels, 49% FDI under approval route was allowed.
Now In order to achieve
level under media and bringing at par both Print and Digital Media limit of 26%
FDI under government approval route for digital media is proposed.
3. Under the Coal Mining existing
regime , 100% FDI was allowed under automatic route for only coal
and lignite mining which was used for consumption by power plants, Iron and
Steel and Cement units etc.,
100% FDI is also permitted for setting up
coal processing plants subject to condition that the company shall not do coal
mining and shall not sell washed coal or sized coal from its plants in open
market.
Further in the extant version, they are
required to supply such coal to such parties who supply raw coal to coal
processing plants for washing or sizing.
Now it has been proposed
that, 100% FDI under automatic route for sale of coal, for coal mining
activities including associated processing infrastructure, subject to
applicable regulations. Associated processing infrastructure would include coal
washery, crushing, coal handling and separate (magnetic and non-magnetic).
Impact and benefit: Global Mining companies can own coal mines, and carry out
processing and sales including exports. This will make companies to bring in
state of art technology in the sector.
4. Contract Manufacturing: As there was no restriction under automatic route in the
manufacturing sector and 100% FDI was allowed without government approval, but
no specific provision was there for contract manufacturing.
Now it has been clarified
that 100% FDI is allowed under automatic route for contract manufacturing. With
this the idea of “Make in India” will be pushed to heights. Foreign Investors
can invest and operated via entities engaged in the business of contract manufacturing.
Conclusion:
ü The above proposed changes will allow to attract more
foreign investment in India and will take up the economy to fast pace
development.
ü The idea of “Make in India” and Online trading will
simultaneously improve the employment opportunities.
ü The approval of Rs 6,268 crore subsidies to will promote
sugar exports and increased the overall GDP of economy, and also the employment
opportunities in this sector.
ü Curbing import of incense stick and motivating homemade
agarbattis will again boost up the job vacancy.
