30/08/2019 - Indian Economy | Mainstorming

IAS Parliament 5 years

KEY POINTS

· The Union Cabinet recently liberalised foreign direct investment (FDI) norms in areas such as single-brand retail, contract manufacturing, and the coal sector.

· This will give retailers more flexibility in the initial years. Further, goods procured for exports by single-brand retailers will be factored in while calculating the percentage of local sourcing.

· Given the possibilities in the retail sector, increasing flexibility should help bring more foreign investment.

· The penetration of the internet will help improve the share of online retail. In this context, the government has also changed the e-commerce norms for single-brand retailers.

· The other significant decision was allowing 100 per cent FDI under the automatic route in contract manufacturing. The idea is that it will help India integrate into the global value chain.

· Since a number of companies are moving out of China because of rising trade tensions with the US, some of them can look at India as an option to relocate.

For wider reforms

· With the easing of norms for single-brand foreign retail, the government should now consider allowing FDI in multi-brand retail.

· This will not only help bring in a significant amount of investment but will also improve supply chains, and the agriculture sector could become a big beneficiary.

· While the decision to allow 100 per cent FDI in commercial coal mining and related investment (earlier it was allowed for captive consumption only) is expected to give a boost to private miners and introduce competition for Coal India, it remains to be seen if global companies would be interested in the sector.

· While these are welcome developments, FDI policy is only the first step. If India intends to be an important part of the global value chain, it has to think beyond the idea of import substitution and ease trade restriction.

· Global companies may not be willing to work with suppliers located in a country with an unpredictable and unfavourable tariff structure.

· Further, the other big obstacle in attracting investment in manufacturing is India’s inflexible land and labour market.

· The government should address these issues to incentivise both global and domestic investment, because the absence of wider policy reforms can restrict actual gains.

Chinna 5 years

Please review...thank you

IAS Parliament 5 years

Good attempt . Keep Writing.

Madhu 5 years

FDI is a major driver of economic growth and a source of non-debt finance for the economic development of the country.

Government has put in place an investor friendly policy on FDI, under which FDI up to 100% is permitted on the automatic route in most sectors/ activities.

Recent FDi norms :

Single-brand retail	Foreign retailers can now start online retail two years prior to setting up a physical store. Mandatory domestic sourcing norms have been relaxed.
Coal mining	100% FDI under automatic route (i.e. without prior approval from the government or the central bank) has been cleared for coal and lignite mining.
Contract manufacturing	100% FDI under automatic route has been permitted.
Digital media	Up to 26% FDI has been allowed under government route for digital media firms uploading and streaming news and current affairs.

Advantages :

Enhance the Ease of Doing Business

Creation of Jobs

Helps small retailers

Other Government reforms towards enhancing India in Global Trade :

The Object of the Contract Labour Regulation and Abolition) Act, 1970 is to prevent exploitation of contract labour and also to introduce better conditions of work. Foreign Exchange Regulation Act (FERA)

Fiscal and Monetary reforms

Comprehensive Economic Cooperation Agreement/s between India and ASEAN, other countries.

Make In India

> EXIM Policy

FDI policy provisions have been progressively liberalized across various sectors in recent years to make India an attractive investment destination. Some of the sectors include Defence, Construction Development, Trading, Pharmaceuticals, Power Exchanges, Insurance, Pension, Other Financial Services, Asset reconstruction Companies, Broadcasting and Civil Aviation

Way forward:

The Foreign Direct Investment (FDI) reforms have always boosted India’s image as a preferred destination for foreign investment. Have also contributed to a significant jump in India’s ‘ease of doing business’ World Bank ranking since 2015.

Taken together with ongoing reforms to FDI policy, India can be expected to continue to grow as an attractive destination for foreign investment and global trade.

IAS Parliament 5 years

Try to avoid listing out points and include about labour laws in India. Keep writing.

Karan Bhagat 5 years

PLease review!!