Web Special: Shaking off the policy paralysis tag

Recently the govt seems to have gone on a reforms binge, read all that you need to know here...

The government recently passed some very important reforms in a move to substantiate their stand on reducing the fiscal deficit, bring inflation under control and stabilize the economy.

One of the biggest and the most awaited reform was the allocation of 51% investment by foreign investors in multi brand retail.

Apart from this the government allowed 49% investment by foreign airlines in the aviation sector and raised the FDI cap in broadcasting from 49% to 74% and allowing foreign investment in power exchanges.   

The UPA government had first made an attempt to introduce FDI in multi-brand in November last year but it beat a hasty retreat following stiff opposition from TMC, Samajwadi Party as well as the opposition parties.

For Single brand, the cabinet decided that any firm that wishes to seek a waiver of the 30% local sourcing norms would have to set up a manufacturing facility in the country. This would help watch makers and textile manufacturers who want to enter India on their own. 

The decision paves way for global retail giants WalMart, Carrefour and Tesco to open retail stores in India under their own brands.

At present WalMart has a 50:50 cash and carry joint venture with Bharti Group, while Carrefour runs wholesale stores. Tesco, on the other hand has a tie-up with the Tata group and supports the Indian firm in the running of Star Bazaar chain of retail outlets.

While all the UPA allies backed the central government's move, the government met some strong opposition with the Trinamool Congress pulling out from the UPA in protest. The TMC gathered support from other regional parties such as Janata Dal and BJD.

Later, the ruling Trinamool Congress (TMC) in West Bengal on Sep 27 introduced a resolution in the Assembly opposing not only foreign investment, but entry of large domestic capital in the retail sector, in a bid to reach out to its political constituency.

 

FDI in multi brand retail

The move is more of a protest against the Centre’s move to allow FDI in multi-retail, over which TMC withdrew support from UPA-II.

The BJP also went on to say that the UPA has betrayed people as earlier, as the head of Rajya Sabha, Manmohan Singh had opposed FDI in multi brand retail and had said that India doesnt need it as it will not create employment.

Standing by its demand to roll back foreign direct investment (FDI) in multi-brand retail, the Bharatiya Janata Party (BJP) has said that it will compel the union government to take the decision back in the winter session

Although a section within the BJP doesn’t support the party’s stand and is pushing for a rethink in the strategy, the top leadership of BJP is adamant that United Progressive Alliance (UPA) government should reverse the decision.

The reforms have met a number of positive and negative responses from various parties and sectors.

The real estate is likely to receive a boost with growing demand for retail space and boost mall development in the country, real estate developers and property consultants said. The decision would help in absorption of surplus retail space in shopping malls across the country.


FDI in aviation

India allowed foreign airlines to buy stakes of up to 49% in local carriers in a long-awaited policy move, providing a potential lifeline to the country's debt-laden airlines by opening up a fresh source of funding.

However, any global carrier eyeing a stake in an Indian carrier must weigh up the benefits of a market with high long-term growth potential but one that has been squeezed by high costs and fierce price competition.

With 49% FDI allowed in aviation, aviation minister Ajit Singh  has a point by point agenda to cure the ailments of the aviation sector. Low cost terminals, getting ATF declared as notified product to bring transparency in its pricing, reducing the tax on it, etc.

However, there are structural issues plaguing the domestic airlines industry that takes the sheen off FDI push and are likely to keep off prospective investors, says a report by India Ratings, the domestic arm of Fitch Rating.

However, the Indian aviation sector has already started receiving attention from foreign investors...

Four days after the Union cabinet allowed 49 per cent foreign direct investment in aviation, a new strategic alliance seems to be on the cards. Jet Airways chairman Naresh Goyal and his top management are in Abu Dhabi for the past couple of days to negotiate with Etihad Airways, fuelling speculation of a possible alliance and investment in the airline.

Jet Airways and Etihad have a code share alliance since 2008.  In 2011, Etihad CEO James Hogan sought the Indian government’s permission to include more India-Abu Dhabi routes under the agreement. Etihad, which has been picking up stakes in airlines across the world, is enthusiastic about investing in India. Goyal, who was once  a staunch opponent of opening up of the sector to foreign airlines, has now changed stance and has welcomed the government decision.

Though 49% FDI was permitted foreign airlines were debarred from investing in Indian carrier, domestic airlines reeling from mounting debt and losses lobbied for a change in rules which was approved in the cabinet meeting last Friday. Govt notified rules for FDI in aviation, excluded Air India, making it clear that the government would remain its owner.