The government on Wednesday further liberalised the foreign direct investment rules in sectors such as coal mining, contract manufacturing and digital media in an effort to get the economy back on the growth track.

The Centre also relaxed the sourcing norms for single-brand retailers.

The relaxation of the norms for the single-brand retail players by allowing them to sell online before setting up stores will make it easier for companies such as Apple Inc to expand their operations.

Briefing reporters on the decisions taken by the Union cabinet, headed by Prime Minister Narendra Modi, commerce and industry minister Piyush Goyal said, “Liberalising foreign direct investment will help in increasing the country’s economic growth.”

Sourcing norms

In single-brand retail, the cabinet has expanded the definition of the mandatory 30-per-cent domestic sourcing norm. It also allowed single-brand retailers to start online sales, waiving the previous condition of first setting up retail outlets.

According to Goyal, the definition of domestic sourcing has been expanded to include exports from third-party manufacturers. This, in turn, will help foreign handset makers operating in India to easily meet the sourcing requirement and open retail stores, which they would own completely and operate.

“To provide greater flexibility and ease of operations to single-brand retail entities, it has been decided that all procurements made from India by them for a single brand shall be counted as local sourcing, irrespective of whether the goods procured are sold in India or exported,” Goyal said.

“Further, the current cap of considering exports for five years only is proposed to be removed to give an impetus to exports,” he added.

The current FDI policy provides that 30 per cent of the value of goods have to be procured from India if the single-brand entity has more than 51 per cent FDI. Besides, the local sourcing requirement can be met as an average of purchases during the first five years, and, thereafter, annually.

The existing policy also states that incremental sourcing for global operations by the non-resident entities undertaking single-brand retail trading, either directly or through their group companies, will be counted towards local sourcing requirement for the first five years.

It has now been decided that “sourcing of goods from India for global operations” can be done directly by the single-brand retail entity, or its group companies, or indirectly by them through a third party, under a “legally tenable agreement”.

Further, the single-brand retailers can start online sales, subject to the condition that they open physical stores within two years of starting online retailing.

Coal mining

The government has approved 100 per cent FDI under the automatic route in coal mining and sale of coal as also associated infrastructure activity that includes washeries, handling and separation units

Till now, foreign investment was only allowed in coal mines allotted for captive use. The new policy will open up investment avenues for companies such as PeaBody, Glencore and BHP Group Ltd.

“The idea is to attract large mining companies into India. There is interest from overseas countries. Some of the mines that would come up in future could be technically challenging and would require global expertise,” a ministry source said.

Coal consumers have welcomed the decision. “100 per cent FDI becomes relevant in commercial mining. For a block to be commercially viable, it has to have at least production of around 10 million tonnes per annum for multiple years,” said V.K. Arora, chief mentor of KCT group.

Other measures

The government has also allowed up to 26 per cent overseas investment in digital media and 100 per cent foreign direct investment in contract manufacturing under the automatic route .

Jehil Thakkar, partner, Deloitte India, said: “FDI in digital media is a welcome development. Clarity around this fast-growing segment of the media industry will act as an enabler for capital infusion.”

While the FDI policy provides for 100 per cent investment under the automatic route in the manufacturing sector, there was no specific provision for contract manufacturing in the policy.

The extant policy provides that only that part of the global sourcing shall be counted towards the local sourcing requirement which is over and above the previous year's sourcing value.

The new rules will usher in significant growth of handset demand and better customer experience, the India Cellular & Electronics Association (ICEA) chairman Pankaj Mohindroo said.

Lack of investment was partly responsible for the country's relatively sluggish economic growth of 5.8% in the January-March quarter. Analysts predict a slower growth rate for April-June, data on which is expected to be released tomorrow.

Last week, Finance Minister Nirmala Sitharaman proposed a series of measures to help the economy and financial markets, and earlier this week the central bank said it would transfer Rs 1.76 lakh crore which includes Rs 1.23 lakh crore as dividend to the government and Rs 52,637 crore from its surplus capital, which could be used to further stimulate the economy.