Introduction
To boost domestic manufacturing, 100% FDI in contract manufacturing under automatic route has been allowed, as said by Piyush Goyal, Commerce and Railways Minister.
Manufacturing activities may be conducted either by the investee entity or through contract manufacturing in India under a legally tenable contract, whether on principal to principal or principal to agent basis.
The revised FDI policy will now allow contract manufacturer to sell products manufactured in India through wholesale and retail channels, including through e-commerce, without the government’s approval.
Impact
The contract manufacturers can sell products produced in India after abiding by the 30% local sourcing norm for foreign single-brand retail companies, with subsequent rollout of brick and mortar stores.
• Allowing 100% FDI through the automatic route for contract manufacturing is true to the Make in India initiative.
• It will attract global companies in India looking to establish alternative manufacturing hubs.
• Until now, an electronics or pharmaceutical company had to buy its products from the contract manufacturer, but now, it can bring in FDI to put money in technology and machinery in the contract manufacturer.
• This could also lead to mushrooming of local contract manufacturers if they acquire the necessary expertise.
Source: Livemint | Contract manufacturing is part of Make in India| Aug 29, 2019
