Cabinet approves 100% FDI in retail, construction

Existing rules allow foreign airlines to own as much as 49% in an Indian airline with the exception of Air India

In July, the government was toying with the idea of liberalising rules for sectors such as single-brand retail, by easing some of the compliance requirements, as well as construction.

The Union Cabinet chaired by Prime Minister Narendra Modi on Wednesday made a decision to allow 100% foreign direct investment in single brand retail through the automatic route - that is, companies making these investments will not require permissions from the government or the Reserve Bank of India. The Cabinet also chose to allow 100 per cent FDI in construction development relating to building townships, housing, infrastructure and real estate broking services. However, this provision was presently not applicable to the national carrier, thereby implying that foreign airlines could not invest in Air India.

100% FDI in single brand retail is expected to attract major investors from all over the world, and allow them to set up their shops easily.

The Union Cabinet on Wednesday announced that foreign airlines would be able to invest up to 49 percent in Air India under agreement method.

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In the civil aviation sector, under the current policy, foreign airlines are allowed to invest under government-approval route in the capital of Indian companies operating scheduled and non-scheduled air transport services up to 49 per cent of their paid-up capital.

On top of that, the Cabinet also allowed FIIs/FPIs to invest in power exchanges through the primary market route. Investments under the government approval route will be processed by concerned administrative department or ministry.

Government said in the released that no approval will be required for FDI in single brand retail trading (SRBT). The automatic route stands for more liberalized regulation.