IN order to broaden the canvas of ease of doing business in the country, the Government intends to liberalise and simplify the Foreign Direct Investment (FDI) policy, which is a major driver of economic growth and a source of non-debt finance. The Union Cabinet on Wednesday approved a number of amendments in the FDI Policy. These amendments will lead to larger FDI inflows contributing to growth of investment, income and employment.

As per the existing procedures, FDI applications involving investments from countries of concern requiring security clearance are to be processed by the Ministry of Home Affairs (MHA) for investments falling under automatic route sectors and activities. It has now been decided that for investments in automatic route sectors, requiring approval only on the matter of investment being from country of concern, FDI applications would be processed by Department of Industrial Policy and Promotion (DIPP) for Government approval. Cases under the government approval route, also requiring security clearance with respect to countries of concern, will continue to be processed by concerned Administrative Department or Ministry.

In a major changes, the Cabinet has also allowed the foreign airlines to invest up to 49% under approval route in Air India. However, this nod comes with two conditions viz., foreign investments in Air India including that of foreign airlines shall not exceed 49% either directly or indirectly and substantial ownership and effective control of Air India shall continue to be vested in Indian National.

The other amendments in FDI Policy include 100% FDI under automatic route for Single Brand Retail Trading (SBRT). Also, 100% FDI under automatic route in construction development has been allowed. The definition of 'medical devices' has been amended in the FDI policy. The Cabinet has further permitted to issue of shares against non-cash considerations like pre-incorporation expenses, import of machinery under automatic route. Making changes in the sector relating to power exchanges, the Government has allowed Foreign Institutional Investors (FIIs) or Foreign Portfolio Investors (FPIs) to invest through primary market as well.

The FDI policy has been amended to stipulate joint audits in investee companies (receiving foreign investments) in situations where the foreign investor wishes to specify a particular auditor or audit firm having international network for the Indian investee company. According to the amended FDI policy, one of the auditors should not be part of the same network.