New FDI Policy will Benefit Retail Sector
Retail, telecom, media and a host of sectors in which foreign direct investment (FDI) is restricted stand to gain from changes in FDI policy that the Cabinet Committee on Economic Affairs (CCEA) cleared today linking approvals to the concept of control for the first time. The new norms were proposed by the Department of Industrial Policy and Promotion (DIPP) and discussed by a Group of Ministers on February 3.
“The objective of these new guidelines is to make FDI norms simple and transparent according to DIPP,” Home Minister P Chidambaram told reporters today when he announced the new measures. The new measures will be implemented with prospective effect. Government sources said two Press Notes — policy documents governing FDI norms — of the 2009 series will be released in the next 10 days.
Under the new guidelines, downstream investments by an Indian company that has foreign investment but is “owned and controlled” by Indians will not be considered FDI (see graphic). “Owned” in this context will mean having a more than 50 per cent shareholding and beneficial ownership. “Controlled” means that the owners will have the power to appoint the majority of board directors and legally direct the board’s actions. “This means there is a huge opportunity for Indian-owned and -controlled companies to bring in FDI and then undertake downstream investments, without bothering about sectoral limits or restrictions,” said a senior government official.
POSTED BY:-
SHILPI KUMARI
PGDM-3rd SEM.