NEW DELHI, Jan 10 - In big bang reforms ahead of BJP government�s last full Budget, foreign airlines were today allowed to buy up to 49 per cent stake in Air India while easing FDI rules for several sectors including single brand retail and construction.
In a bid to boost growth and improve ease of doing business, the Union Cabinet allowed 100 per cent foreign direct investment (FDI) in single brand retail and construction development under the automatic route.
It permitted foreign airlines to invest up to 49 per cent under the approval route in the debt-ridden, loss making national carrier, said an official statement issued after the Cabinet meeting chaired by Prime Minister Narendra Modi.
The Cabinet also allowed foreign institutional and portfolio investors to invest in power exchanges and relaxed FDI policy for medical devices and audit firms associated with companies receiving overseas funds.
Besides, the clarification that real estate broking service will not amount to real estate business has addressed the issue being faced by such firms. It is therefore, eligible for 100 per cent FDI under the automatic route.
The decisions came ahead of Modi�s participation in World Economic Forum at Davos this month where he is likely to hard sell India as an attractive investment destination.
They also came weeks before the BJP government presents its fifth and final full year budget on February 1 before general elections next year.
�By permitting FDI up to 100 per cent under automatic route in single brand retail trading, the government has eliminated the time lag for foreign investor to set up a single brand retail operations in India,� said Dev Raj Singh, Executive Director, Tax & Economic Policy Group, EY India.
The changes will give a boost to FDI inflows, he said.
In a move that will give a boost to foreign retailers like Ikea, the government approved 100 per cent FDI under the automatic route for single brand retail trading. Earlier also 100 per cent FDI was allowed in the segment, but it required government approval.
The amendments are intended to liberalise and simplify the FDI policy so as to provide ease of doing business. �In turn, it will lead to larger FDI inflows contributing to growth of investment, income and employment,� the government said in a statement.
The decision to allow foreign airlines to invest up to 49 per cent would pave away for global airlines to bid for government stake when it is put for sale.
�Foreign investment(s) in Air India including that of foreign airline(s) shall not exceed 49 per cent either directly or indirectly substantial ownership and effective control of Air India shall continue to be vested in Indian National,� the statement said.
Overseas investment policy has also been liberalised in case of power exchanges, an online platform where electricity is traded. Currently, the policy provides for 49 per cent FDI under automatic route in power exchanges.
However, FII/FPI (foreign portfolio investors) purchases were restricted to secondary market only.
�It has now been decided to do away with this provision, thereby allowing FIIs (foreign institutional investors/FPIs to invest in power exchanges through primary market as well,� the statement said.
Commerce and Industry Minister Suresh Prabhu said the decisions would help �remove roadblocks� for receiving foreign investments and expressed the hope that relaxation of norms would facilitate faster development of the economy. � PTI