Under the 2018 amendments in Foreign Direct Investment (FDI) policy approved by the Cabinet, the maximum Foreign Direct Investment (FDI) permitted under the automatic route in Single Brand Retail Trading (SBRT) is _____
- AOption (a)
40%
- BOption (b)
85%
- COption (c)
100%
- DOption (d)
60%
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Correct answer
100%
Why this answer is correct
The correct answer is 100%.
Key Points
- In January 2018, the Union Cabinet, chaired by the Prime Minister, approved several amendments in the Foreign Direct Investment (FDI) policy to simplify and liberalize the regime for investors.
- The most notable change was permitting 100% FDI under the automatic route for Single Brand Retail Trading (SBRT), which eliminated the need for Government approval for investments exceeding 49%.
- Before this amendment, while 100% FDI was allowed in SBRT, only up to 49% could be brought in via the automatic route, and any stake beyond that required approval from the Foreign Investment Promotion Board (FIPB) or its successor bodies.
- The policy move was designed to improve the Ease of Doing Business in India, encouraging global brands like Apple, IKEA, and Nike to set up wholly-owned subsidiaries and retail stores directly.
- Single Brand Retail Trading involves the sale of products that are sold under the same brand name globally and are branded during manufacturing, ensuring a uniform consumer experience.
Additional Information
- Local Sourcing Norms:
- For entities with more than 51% FDI in SBRT, there is a mandatory requirement to source 30% of the value of goods from India, preferably from MSMEs and local artisans.
- The 2018 policy allowed incremental sourcing for global operations by the brand entity to be set off against the 30% local sourcing requirement for a period of five years.
- FDI Routes in India:
- Automatic Route: The non-resident investor or the Indian company does not require any prior approval from the Reserve Bank of India (RBI) or the Government of India.
- Government Route: Prior approval is mandatory through the Foreign Investment Facilitation Portal (FIFP), managed by the DPIIT under the Ministry of Commerce and Industry.
- Policy Impact:
- These reforms aimed to boost domestic manufacturing, generate employment, and provide Indian consumers with access to a wider variety of global products and technologies.