Continuing with its drive to make India look and feel a more business and startup friendly country, Indian Government is now allowing further relaxation in FDI rules for manufacturing, along with 15 other sectors.
Not so long ago, the Government made some changes in the rules related to Foreign Direct Investment (FDI) and also defined the term “manufacturing” so that the companies get clear view regarding the same and to boost the e-commerce sector.
Also, with the new change in rules, it now allows all the manufacturers in the country – with or without foreign investment, to sell their goods online via e-commerce platforms without any restrictions or getting government approval.
As per the definition by the Department of Industrial Policy and Promotion, the world “manufacturing” has been defined as “any change in the physical object resulting in transformation of the object into a distinct article with a different name or bringing a new object into existence with a different chemical composition or integral structure”.
In short, the companies which are assembling products in India by importing parts and components such (mostly automotive and telecom equipment manufacturers) will be benefited from this. But, the companies which are just relabeling will not be qualified as manufacturers.
The government has also eliminated the requirement of mandatory permission from the Cabinet Committee on Security (CCS) beyond 49 per cent.
FDI norms across 15 sectors were liberalized by DIPP on November 10. The policy changes are effective from May 12, 2015. The policy now allows a single entity to undertake both wholesale as well as single-brand retail including e-commerce provided FDI regulations for both businesses are met.
The decision to raise the threshold limit for approval by the Foreign Investment Promotion Board (FIPB) to Rs. 5,000 crore from Rs. 3,000 crore has also been notified by the Department of Industrial Policy & Promotion.
This move from the Government, like most others so far, seems to be aimed at Prime Minister Narendra Modi’s Make In India initiative which is aimed to boost up the manufacturing sector of India.
Other sectors, where these rules have been eased, include defence, construction development, broadcasting, civil aviation, agriculture, plantation, limited liability partnerships, manufacturing, single-brand retail and private sector banking.
