Govt allows 49% FDI in Air India, retail rules eased

NEWDELHI: Burnishing its reform credentials ahead of Prime Minister Narendra Modi’s hard-sell of the India growth story at the World Economic Forum (WEF) in Davos later this month, the Cabinet on Wednesday unveiled measures to liberalise the foreign direct investment (FDI) regime in aviation, single-brand retail, power exchanges and real estate broking.

The government allowed foreign airlines to buy a stake of up to 49% in Air India with prior government approval ahead of the state-owned airline’s proposed privatisation. Existing rules allow foreign airlines to own as much as 49% in private Indian airlines, but not in Air India.

After a Cabinet meeting chaired by Prime Minister Modi, the government clarified that substantial ownership and effective control of Air India will remain with Indian nationals. “Foreign investments in Air India including that of foreign airlines shall not exceed 49% either directly or indirectly,” the government said in a statement.

The government’s decision was immediately criticised by the Congress and the Communist Party of India (Marxist).

Senior Congress leader Anand Sharma said that 100% FDI in single-brand retail was notified during the previous UPA government and the only change made is to allow it through the automatic route.