Government Retains 51% FDI in Multi-Brand Retail

New Delhi: The government has retained the previous UPA regime's decision allowing foreign retailers to open multi-brand stores with 51 per cent ownership, in its consolidated FDI or foreign direct investment policy released on Tuesday, notwithstanding the political slugfest over the issue.

The latest edition of the annual FDI document also incorporates all policy changes effected over the past one year, including by the Narendra Modi government in sectors like defence, insurance and railways.

Multi-brand retail was opened up for foreign direct investment with a 51 per cent cap in September 2012, when the Congress-led UPA government was in power.

The BJP-led NDA government, which came to power in May last year, has not made any changes in this policy. However, the BJP had opposed foreign investment in multi-brand retail sector in its election manifesto last year.

The 119-page new compendium, which came into effect on Tuesday, mentions all existing FDI policy decisions as also the changes made over the past one year. These include changes in the foreign direct investment cap in defence and insurance sectors, where limits have been hiked to 49 per cent from 26 per cent earlier.

Interestingly, Department of Industrial Policy and Promotion Secretary Amitabh Kant earlier on Tuesday said, "In the last 8-9 months we have opened up every single aspect of India's economy. We have opened up our defence sector, construction, insurance, medical devices...and other than multi-brand retail. India today is the most open economy in the world."

The Department of Industrial Policy and Promotion (DIPP), which is under the Ministry of Commerce and Industry, is the nodal agency on FDI policy. It compiles all policies related to India's FDI regime into a single document to make it simple and easy for investors to understand.

Investors would otherwise have to go through various press notes issued by the industry department and Reserve Bank of India (RBI) regulations to understand the policy. The government updates the policy every year.

For insurance sector, it said no Indian insurance company will allow the aggregate holdings by way of total foreign investment in its equity shares by foreign investors, including portfolio investors, to exceed 49 per cent.

It further said that the control would remain with an Indian entity despite increase in the foreign investment cap.

Relaxing FDI policy in railways, the government has permitted 100 foreign investment in construction, operation and maintenance of suburban corridor projects through PPP (public-private partnership), high speed trains, dedicated freight lines, railway electrification and mass rapid transport systems.

Similarly, the new compendium has included the liberalisation of policy in sectors like medical devices and construction development.

FDI up to 100 per cent under the automatic route was permitted for manufacturing of medical devices such as implant, software intended by its manufacturer to be used specially for human beings or animals for one or more of the specific purpose and diagnosis kit.

In construction sector too, the government has relaxed the policy.