Cabinet clears 49% investment through FDI route in Air India

Cabinet clears 49% investment through FDI route in Air India

Cabinet clears 49% investment through FDI route in Air India

In major changes liberalising foreign direct investment in key sectors, the Union Cabinet on Wednesday approved 100 per cent foreign investment in single brand retail trading (SBRT) and construction development and made a decision to open up Air India for FDI up to 49 per cent.

Janne Einola, country manager at the India unit of Swedish fashion retailer H & M Hennes & Mauritz AB, said: "We are happy to hear about the India sourcing requirement being offset towards H&M's global sourcing from India; while it is in the right direction, we look forward to the same relaxation for the period beyond the initial five years as well, which works towards ease of doing business in India".

The party said that though "FDI up to 49 per cent was permitted under the automatic route (till now), this decision to liberalise FDI in retail trade will have harmful consequences for domestic retail traders and shopkeepers".

The present FDI policy on single brand retail trading allows 49 per cent FDI under automatic route and FDI beyond 49 per cent and up to 100 per cent through government approval route.

Foreign ownership might soon be a reality for Air India as the government pilots efforts to privatise the ailing national airline and turnaround its flagging fortunes similar to the likes of British Airways and Qantas.

Any foreign airline wishing to pick up a stake in Air India will first have to take the approval of the government.

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Besides, the government also decided that foreign institution investors and portfolio investors be allowed to invest in power exchanges through primary market and amended the definition of "medical devices" in its FDI policy.

The government is in the process of finalising the modalities for strategic disinvestment of debt-laden Air India. For additional investment, they were required to obtain government approval. Currently, the policy provides for 49 per cent FDI under automatic route in power exchanges. So far, such investors were restricted only to investments in the secondary market. "This is done perhaps for the Prime Minister to make a statement at Davos", Sharma said.

Cases under the government approval route, also requiring security clearance with respect to countries of concern, will continue to be processed by concerned administrative department or ministry.

This is the second major liberalisation in FDI policy by the NDA government in one go after major changes effected in June 2016.

Expressing similar views, Wildcraft co–founder Siddharth Sood said: "The consumer in the country will be direct beneficiary of this move as they will have access to the brands hitherto unavailable in the country as it will be much easier for the global brands to set up shop in India".

"Global brands across different categories, from apparel to electronics to accessories will be aided through this, providing further options to Indian consumers and improving IndiaÂ's ranking in ease of doing business", he added.

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