FDI in retail and aviation will improve legal and compliance issues

MUMBAI: Foreign Direct Investment ( FDI) in aviation and retail sector will improve corporate governance standards with the foreign investors being represented at the board level.

On Friday government announced much awaited relaxation of 51% in multi-brand retail in retail sector. Also, central government has clarified that foreign investors can increase their stake in domestic airlines up to 49%.

"FDI in aviation will improve the safety and legal compliance aspects of the sector," said Ramesh Vaidyanathan, Partner, Advaya Legal. "This move will also improve corporate governance standards, with the foreign investors being represented at the board level."

The option for the states to welcome it if they choose to would also help muzzle some of the opposition. The requirement that for single-brand retail, a firm seeking waiver of the mandatory 30 % local sourcing norm would have to set up a manufacturing facility in the country creates ambiguity, the lawyer feels.

"Would a small manufacturing set up with minimum investment qualify for the waiver," questions Vaidyanathan. In recent time there was issues related to corporate governance in single brand retailer such as kids wear Lilliput. While, companies such as Subhiksa and Vishal Retail had to closed operations due to lack of funds.