Indian is reportedly mulling over allowing 100 per cent foreign direct investment (FDI) in contract manufacturing to attract overseas investments. A proposal would be finalised soon by the Commerce and Industry Ministry and sent for cabinet approval. Under existing rules, 100 per cent FDI is permitted in the manufacturing sector under the automatic route.
A manufacturer is also allowed to sell products manufactured in India through wholesale and retail channels, including through e-commerce, without government’s approval.
The current policy does not talk about contract manufacturing and it is not clearly defined in the policy, and therefore, there is a need for a clarification on the issue as big technology companies across the world are opting for that route, a report quoting anonymous sources.
FDI in India dipped 1 per cent to $44.36 bn in 2018-19. Last year, the government had relaxed FDI rules for several sectors, including single brand retail, non- banking financial companies and construction.