The Modi government has gone for a raft of changes in the foreign direct investment (FDI) rules for 15 sectors - including retail, defence, construction, banking and electronic media - signalling that despite NDA's electoral defeat in Bihar has not deterred it from the path of economic reforms. Although these measures have been discussed for the past few months, the decisions were cleared by Prime Minister Narendra Modi himself and the announcements were made before being approved by the Union Cabinet. Sources said that some of the decisions, such as allowing 100% FDI in coffee, rubber, cardamom, palm oil and olive oil plantations, were taken at Modi's behest.
The PM also was keen to ensure that the rules provide a boost to those manufacturing locally, with sources pointing to the decision to allow “Indian manufacturers” to retail their goods, including on e-commerce platforms - a move that will benefit the likes of Fabindia and Hidesign. Other “manufacturers” too have been allowed to enter the retail arena without the government's approval. Apple and other “high technology” retailers will no longer be required to mandatorily source 30% of their goods from India to comply with conditions related to single-brand retail, according to the changes in the FDI rules announced by the government.
“The FDI reforms will touch 15 sectors and benefit youth. Government's commitment to development and reforms is unequivocal and unwavering... Today's reforms are another example of emphasis on minimum government, maximum governance. They will ease, rationalise and simplify processes,” Prime Minister Modi tweeted. The decision, coming two days after BJP's Bihar poll defeat, is seen as an attempt by the Centre to show its commitment to reforms and its willingness to open up the economy despite political challenges and hurdles.
Unlike most policy changes, which are approved by the Union cabinet, the government this time chose to use a provision that allowed the Prime Minister to decide on the announcements, which were rushed in before his departure to the UK and Turkey.
Although the department of industrial policy and promotion (DIPP) had been working on the proposals for the past few months, sources said the government opted to use Rule 12 of the Transaction of Business Rules to usher in the changes. The clause allows for “departure from rules” and says: “The Prime Minister may, in any case or classes of cases, permit or condone a departure from these rules, to the extent he deems necessary.”
Sources said that it was only after the Prime Minister's Office issued the instructions that the decision was announced “informally.” Later, Mod tweeted about the decisions and Jaitley briefed media persons.
