Highlights of FDI Reforms: MSMEs Perspective

The Raghuram Rajan’s announcement confirming his exit as the Reserve Bank of India (RBI) Governor came as a shock. While the industry was under anxiety, surprise or a shock mode.

However, in order to boost investor confidence, and project India as the most ideal land of ‘milk and honey’, this government of Prime Minister Narendra Modi, on Monday, announced 100 per cent Foreign Direct Investment (FDI) in various sectors including Defence, Food, Animal Husbandry, Aviation and Broadcasting. The norms for single brand retailing have been relaxed, which would pave the way for tech giant Apple to open its stores in India.

Many within the global investors, were concerned that India’s monetary policy would begin to show signs of crack once Rajan is shown the door.

Within hours, the business atmosphere changed from one of uncertainty to that of optimity. Electronic media was quick to highlight it as the most radical liberal reform introduced by any government in the past two decades. On the 25th anniversary of Narsimha Rao government (which opened the doors of Indian economy for Liberalization, Privatization, Globalization), Modi has turned India into the most open economy in the world. Free-marketists have already begun penning columns in support of Modi for converting the third largest economy in India as the most ideal destination for investment.

With an endeavour to make India a manufacturing hub, Government today allowed 100% FDI in some sectors and also relaxed several FDI norms.

In a series of tweets, Department of Industrial Policy & Promotion (DIPP) highlighted key announcements made today.

Here are some highlights of newly introduced FDI reforms:

• “100% FDI under govt approval route for trading, including through e-commerce, in respect of food products manufactured or produced in India.”
• 49% FDI has been permitted through govt approval route for access to modern technology in the country or for other reasons to be recorded, DIPP said.
• The condition of access to ‘state-of-art’ technology in the country has been done away with wrote DIPP.
• 100% FDI in automatic route in Teleports, DTH, Mobile TV & Headend-in-the Sky Broadcasting Service(HITS), it tweeted.
• 74% FDI under automatic route in brownfield pharmaceuticals and government approval route beyond 74% will continue, said DIPP.
• FDI up to 49% is now permitted under automatic route in Pvt Security Agencies & beyond 49% and up to 74% permitted with govt approval route, tweeted DIPP.
• 100% FDI in Animal Husbandry(including breeding of dogs),Pisciculture, Aquaculture and Apiculture now allowed without controlled conditions.
• Single Brand Retail Trading: It has now been decided to relax local sourcing norms up to three years; it said adding relaxed sourcing regime for another 5yrs in Single Brand Retail Trading of products having ‘state-of-art’ and ‘cutting edge’ technology.

These steps are considered to impact the MSME sector and the most decisive element would be to explore how this sector considers it as a boost for the upliftment.