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New Delhi : The Union Cabinet chaired by PM Narendra Modi on August 28, 2019, approved the proposal for review of Foreign Direct Investment in various sectors.

The changes in FDI policy will result in making India a more attractive FDI destination leading to benefits of increased investments, employment and growth. In the coal sector, for sale of coal, 100% FDI under automatic route for coal mining activities including associated processing infrastructure will attract international players to create an efficient and competitive coal market.

Further, manufacturing through contract contributes equally to the objective of Make in India. FDI now being permitted under automatic route in contract manufacturing will be a big boost to Manufacturing sector in India. Easing local sourcing norms for FDI in Single Brand Retail Trading (SBRT) was announced in Union Budget Speech of Finance Minister. This will lead to greater flexibility and ease of operations for SBRT entities, besides creating a level playing field for companies with higher exports in a base year.

In addition, permitting online sales prior to opening of brick and mortar stores brings policy in sync with current market practices. Online sales will also lead to creation of jobs in logistics, digital payments, customer care, training and product skilling, according to a PIB release.

FDI is a major driver of economic growth and a source of non-debt finance for the economic development of the country. The Government has put in place an investor friendly policy on FDI under which FDI up to 100% is permitted on the automatic route in most sectors/ activities. FDI policy provisions have been progressively liberalised across various sectors in recent years to make India an attractive investment destination. Some of the sectors include Defence, Construction Development, Trading, Pharmaceuticals, Power Exchanges, Insurance, Pension, Other Financial Services, Asset reconstruction Companies, Broadcasting and Civil Aviation.

As per UNCTAD’s World Investment Report 2019, global foreign direct investment (FDI) flows slid by 13% in 2018  to US $1.3 trillion from US $1.5 trillion the previous year – the third consecutive annual decline. Despite the dim global picture, India continues to remain a preferred and attractive destination for global FDI flows. However, it is felt that the country has the potential to attract far more foreign investment which can be achieved inter-alia by further liberaliing and simplifying the FDI policy regime.

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