Foreign Direct Investment(FDI) reforms

Relaxations were made in foreign direct investment regulations in August 2019 on 

• Single brand retail, 
• Commercial coal mining, 
• Contract manufacturing and 
• Digital media.

The reforms as follows:

• relaxation in the domestic sourcing norms for single brand retail.  Currently, the FDI policy says that a single-brand retail company with more than 51% FDI needs to source 30% of its goods from within India. The new decision says that this 30% can be calculated over the first five years of operation. Further, sourcing for exports will also count towards the local sourcing requirement. Single-brand retail companies can now start selling online before setting up a brick and mortar store as long as they set one up within two years of starting online sales. Earlier, they had to set up a brick and mortar store before selling online. Online sales will lead to creation of jobs in logistics, digital payments, customer care, training and product skilling.
• permit 26% FDI, with government approval, for uploading and streaming news and current affairs using digital media, on the lines of print media.
• The current FDI policy provides for 100% FDI under the automatic route in the manufacturing sector. There was no specific provision for contract manufacturing in the policy. It has now decided to allow 100% FDI under the automatic route in contract manufacturing in India as well. 
• 100 per cent FDI for sale of coal, coal mining activities. Present policy allows it only for captive mining for power companies etc.

As is clear above, the reforms aim to make India a more attractive destination, leading to benefits of increased investments, employment and growth. The reforms are part of India’s strategy to become part of the global supply chain amid its disruption due to the US-China trade war.