December 2012

The Union Cabinet cleared the proposal of foreign direct investment (FDI) for 51 percent in the multi-brand retail chains and 49 percent in Aviation power exchanges industry.

Passing of the proposal have cleared the floor for welcoming the multi-brand retail chains like Wall mart and Tesco and Carrefour in the country for setting up of their shops and retail outlets. Similarly, the 49 percent of FDI allowed in aviation and Power exchanges will bring in funds for the domestic carriers on a verge of death and will help in enhancement of power availability and distribution management, respectively.

Conditions put forward for investors in the proposal for the multi-brand retails

1. The proposal makes a clear stand that investors looking ahead for investments will have to take the permission in form of approvals from the Foreign Investment Promotion Board
2. Investment of minimum $100 million is a must for any foreign investor planning to invest in India, out of which 50% of the investment should be made in creation of back-end infrastructure. Back-end investment means investments that is made in quality control, warehouse creation, cold storage, design improvement, manufacturing, processing and packaging
3. The investors will have to get 30% of the production of their total products by the small-scale industries
4. The proposal also clears that the agricultural produce like pulses, flowers, fruits, vegetables, poultry item, fishery, meat and others can be unbranded
5. Investors can invest in the 51 cities with a minimum population of 10 lakh people as per the census presented in the year 2011

For making investment in the aviation sector, the proposals have

1. This will help in making equity invasion for the aviation companies seeking financial support at the time when maximum of the domestic airlines are passing through a phase of losses.
2. Investors who are not functional in airline business can own equity of 49 percent directly or indirectly in the Indian Aviation Companies.

FDI in Power Exchanges will be guided via

1. 49 percent of FDI in power trading exchanges will be taken care of as per the regulation laid down by SEBI and Central Electricity Regulatory Commission (Power Market) Regulations) 2010
2. The commerce minister stated that Foreign Institutional Investors cannot exceed a limit of 26 percent investment and the paid-up capital will be restricted to 23 percent
3. FII can be permitted under automatic routes whereas; the FDI will be scrutinized under the route approved by the government
4. The generation of electricity, power transmission and distribution along with trading will be done in accordance to the provisions of the Electricity Act 2003
5. The current policy allows FDI up to 100 percent in power sector (atomic energy is an exception)

What does it mean for different economic sections of India

1. Economy: Help in reversal of the economic slowdown, attract the investment of billions of dollars from foreign market and spin jobs to a greater extent
2. Kirana Stores: Will lower down the selling price, because they will purchase the supplies from deep down retailers
3. Retailers: Can sell their equity up to 51% to the global leaders
4. Farmers: They can sell their produce directly at higher prices and the presence of middle man will end
5. States: Decision to allow the retail giants or prohibit lies in the hands of states
6. Common Man: A chance to gain big discount with many options to shop
7. UPA government: Got a chance to wash away the blames of policy paralysis

Go Back To Main Page