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Easier FDI rules, single brand retail on radar

The government is stepping on the accelerator to boost foreign direct investment (FDI) as the UPA tenure runs into its last few months.

business Updated: Nov 04, 2008 22:50 IST
HT Correspondent

The government is stepping on the accelerator to boost foreign direct investment (FDI) as the UPA tenure runs into its last few months.

A major review of the FDI regime is expected in the coming weeks, with the government considering a relaxation of rules in retail activity related to sectors like sports goods and consumer electronics to help achieve the 2008/09 target of attracting $35 billion, Commerce and Industry Minister Kamal Nath said on Tuesday.

Nath told reporters after a foreign trade seminar that the government would further ease FDI rules, including those related to defence production. He gave no details, but said the matter would come up before the Cabinet soon.

The government is considering allowing foreign direct up to 51 per cent for retail in consumer electronics, electrical products and sports goods as well as accessories.

The Commerce and Industry Ministry has moved a cabinet note to take portfolio investments by foreign institutional investors (FIIs) in sectors like banking and telecommunications outside the overall sector investment ceiling, government sources told HT.

In areas like banking, credit information, broadcasting, commodity exchanges and telecommunications, sector ceilings currently apply for FDI and FII funds taken together.

At present, banking and telecom have 74 per cent foreign investment ceiling (FDI plus FII), which would, after the policy is accepted by the Cabinet, be changed to 74 per cent FDI alone.

FDI inflows totalled $17.21 billion in the April-September period, up 137 per cent over the same period a year ago.

The proposal to permit retail of consumer electricals and electronics will cover a wide range of products of every day use, especially durable items used in entertainment, communications and home automation. Retail activity in consumer electronics requires significant investment in developing large retail space and building up supply chain logistics.

Sports goods and accessories similarly cover a broad spectrum ranging from sports bags, clothing to products such as sunglasses, footwear and headgear. The country currently imports $28 million worth sports goods annually but the demand is expected to shoot up as the economy expands and in the run-up to the Commonwealth Games scheduled to be held in Delhi in 2010.