|NATH: WELCOME NOTE
New Delhi, Jan. 4: The group of ministers on foreign investment today suggested bringing more areas in the core sector under the automatic route to increase FDI inflows. The, committee, which asked the government to simplify rules, also took up the issue of FDI in single-brand retail trading at its meeting this evening.
Another key proposition considered was related to allowing 100 per cent FDI through the automatic route.
“The proposals have been finalised and the recommendations will be put up before the cabinet for clearance,” Sharad Pawar, chairman of the ministerial panel, said after the 90-minute meeting.
Commerce minister Kamal Nath said ways to simplify and rationalise the foreign direct investment route were discussed. He did not elaborate on any structural changes.
“We need to bring down the number of gates,” Nath said, referring to the problem of multi-approvals in certain areas.
He said the question of liberalising FDI was not discussed but the meeting looked at ways of having “one gate” instead of three to four at present. He said “double approvals” were required in some areas.
For example, even if Sebi or Reserve Bank approval has been secured for clearing a particular FDI proposal, there was a need to get FIPB approval for the same project, he said.
Nath said the issue of FDI in single-brand retail trading also figured in the meeting. The government is toying with the idea of allowing FDI in this area for big companies in a way that does not affect small (kirana) stores.
The logic is that foreign companies such as the Korean chaebol Samsung have manufacturing facilities in the country. Therefore, it should be allowed to set up its own showrooms, like the Indian companies in the same line of business.
Senior officials said brands like Nike and Reebok, for instance, have upper middle class clients, who, in any case, pick up imported goods in large quantities from showrooms selling a particular brand only.
The potential for retail FDI is also seen to be large in leading food brands which could have backward linkages with agriculture through cold chains.
The government is of the view that single-brand showrooms will not displace the business of small stores that form the bulk of the retail trade in India.
As a result it would be politically feasible to steer such a proposal as the Left parties and the BJP are opposing FDI in retail on the grounds that it would displace the small stores, which sustain millions of traders .
Commerce minister Nath feels FDI in retail food processing will help generate a large number of jobs in the country. In that respect, it is an economically and politically feasible option.