Archive for June, 2016

No change in FDI limits, but `state of art’ tech not needed for foreign inflow of over 49% in defence

FDI Ammo

India has relaxed foreign direct investment norms in defence sector, doing away with the clause that allowed only “state of the art“ technology to be considered for stakes of more than 49% and thereby giving the government more power to decide on investment proposals by foreign entities.

Although the government kept the FDI limit unchanged ­ at 49% under the automatic route and 100% under approval route ­ it ushered in a major boost to the small arms manufacturing sector.

The decision announced on Monday to allow 49% FDI in manufacturing of small arms and ammunition under the automatic route is expected to attract major firms such as Heckler and Koch, Beretta, Colt and IWI to India, which has a huge requirement of firearms for the armed forces, paramilitary as well as police forces.

“The private sector has been striving to share the workload of the OFB (Ordnance Factories Board) for small arms and ammunition manufacture, but the ambiguity in law prevented it from doing so. Now, with this being clearly brought under the defence FDI policy regulations, it will provide a strong impetus, a definite path for the sharing of workload,“ said Ankur Gupta, vice president, aerospace and defence at EY India.

The industry, however, reacted with caution over the removal of the clause which mandated that only state of the art technology be allowed for consideration of investments for over 49% share in projects. Proposals of over 49% FDI are decided jointly by the ministries of defence, commerce and home. As per the revised rules, such proposals will be permitted “in cases resulting in access to modern technology in the country or for other reasons to be recorded”.

This has given the government more authority to decide on foreign investments, leaving overseas entities unclear about which of their proposals will be allowed.

“The ambiguity on what is modern technology remains and there is no clarity on what are the norms to be followed for investing over 49%. This has led to even more confusion,” said an executive at a foreign firm, requesting anonymity.

Source: The Economic Times (Delhi)

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British bank Barclays has launched a new financial technology platform in Mumbai which will provide startups a physical site to work and interact with stakeholders and their peers in other markets for a fee. The lender hopes that providing such a platform will help it find innovative financial technology quickly and at a cheaper cost.

Mumbai is a seventh such location that the bank has maintained across the globe following London, Manchester, New York, Cape Town and Tel Aviv under this so-called `Rise’ platform. It will start its eighth location in Vilnius, Lithuania, next month.

Barclays will not invest in these companies initially but hopes that the ideas generated through this platform can be used by the bank in its own innovation, said Lubaina Manji, head of Rise and group innovation office at Barclays.

“It is five times cheaper and three times faster for us to take out new ideas from this platform and get the innovation back into Barclays,“ said Manji.She gave the example of an innovation by a startup called Dopay in Egypt which helped employers to transfer employee salaries electronically, cutting out cash. As a result of the innovation, Barclays got 2 lakh new accounts by issuing debit cards.

Over 3,700 startups across the world have applied to be the part of this platform, 70% of which could sign an agreement with Barclays. However, startups wanting to sign up to be a part of the network have to pay a fee depending on how much it will use the facilities.

Mumbai was chosen as one of the cities for the platform to be present because Barclays banking operations are based in this city and about 12% Barclays employees are based in the country.

Sellers to be charged higher commissions from June 20

Flipkart has revised its return policy , narrowing the window when a customer can send back a product bought on its website to 10 days from the previous 30 on most top-selling products. The leader of India’s e-commerce space also told sellers on the platform that they will have to pay higher commissions from June 20.

The no-questions-asked return policy followed by e-commerce firms has led to a logistical nightmare and additional operational expenses for sellers on online marketplaces as they have to pay for the return shipping.

The shortened return period is likely to address, at least to some extent, this concern of sellers and help Flipkart attract more to sell on its platform. But the move to levy higher commission is an attempt to turn a profit that eludes most of India’s top e-commerce firms. Rival Amazon, too, recently increased seller commissions.

Sellers said the revised policy will increase product prices on the Flipkart platform by about 9%.The new return policy will apply on categories such as electronics, books and mobile phones, which form the bulk of the sales on Flipkart. The 30-day return policy will remain only for clothing, footwear, watches and eyewear, jewellery and fashion accessories, as well as large appliances. “The impact of this change should come into effect from July ,” the company said in a communication to sellers. (more…)