NEW DELHI:India announced sweeping relaxations in foreign direct investment ( FDI ) rules in single-brand retail and other areas besides allowing overseas carriers to acquire as much as 49% of Air India to help speed up its divestment. The moves came ahead of Prime Minister Narendra Modi ’s trip to the World Economic Forum in Davos, where he is expected to showcase the country’s investment potential.Overseas retailers can now delay having to meet the 30% local sourcing norm by five years, removing a significant stumbling block. Approvals for such investments have also been made automatic.Single-brand retailers can set off “incremental sourcing of goods from India for global operations during initial five years, beginning April 1of the year of the opening of first store against the mandatory sourcing requirement of 30% of purchases from India”. After five years, the firm will have to meet the sourcing norm every year.Brands such as Uniqlo and Xiaomi that had applied to start singlebrand retail businesses may now get approval under the automatic route. The easing of the sourcing rules should help companies like H&M, which started operations in India in 2015, and Ikea, which plans a 2018 opening. They have been seeking such a relaxation.The cabinet also allowed overseas airlines to own up to 49% in Air India subject to conditions. The earlier policy allowed foreign airlines to own up to 49% in Indian carriers but excluded Air India.However, the overall overseas investment limit will be 49% against 100% for other Indian carriers. Ownership and control of Air India will have to remain in the hands of Indian nationals, the government said.Commerce and industry minister Suresh Prabhu said the government has decided to “remove roadblocks” to foreign investment. “We hope it will facilitate faster development of the economy,” he said.“It is a welcome move as it will save time that went into scrutinising and processing these applications,” said EY executive director Devraj Singh, referring to the automatic approval route.The reform will boost India’s attractiveness as an investment destination.“The liberalisation in the single-brand retail trading sector is a progressive move in the direction of ‘ease of doing business’ in India,” said Goldie Dhama, partner, regulatory, PwC India.The Confederation of All India Traders opposed automatic approval, saying it would hurt local stores. “It will facilitate easy entry of MNCs in retail trade of India and will also violate the poll promise of BJP,” it said.The cabinet committee on economic affairs (CCEA) approved 100% FDI in real estate broking services and allowed foreign institutional investors (FIIs) and foreign portfolio investors (FPIs) to invest in power exchanges through the primary market as well.“It has been decided to clarify that real-estate broking service does not amount to real estate business and is therefore, eligible for 100% FDI under automatic route,” the government said.In all sectors where FDI is allowed under the automatic route, the new policy will also allow the issue of shares against non-cash considerations such as pre-incorporation expenses, import of machinery, etc, under the automatic route.The Department of Industrial Policy and Promotion (DIPP) will process applications under the automatic route in cases where the investment is from a so-called country of concern from now on. Security clearance for such FDI proposals was earlier dealt with by the ministry of home affairs. For all proposals under the approval route requiring security clearance, the administrative ministry concerned will process the application.The FDI policy for pharmaceuticals was amended to stipulate that the definition of a medical device would be that included in the policy. This was earlier subject to any amendment of the definition in the Drugs and Cosmetics Act.The changes cover audits as well. An FDI investor can ask for the audit of an investee company by a particular auditor or audit firm having an international network. In such cases there will be a joint audit where one of the auditors is not part of the network sought by the FDI investors.