JOIN USCentre okays FDI in retail
The measure is expected to bring in the much-needed foreign direct investment into the country and enhance the image of the government accused of policy paralysis in the recent past.
The Cabinet also allowed 100 per cent in single brand retail, opening floodgates for players like Wal-Mart, France’s Carrefour S A, UK’s Tesco and Germany’s Metro AG to expand operations in India.
Currently, the government has allowed only 51 per cent FDI in single-brand retail and 100 per cent in wholesale or cash-and-carry operations, but no FDI in multi-brand retail.
As for cash and carry or wholesale trade, FDI in this sector was allowed way back in 1997 during the United Front Government. Foreign investment of up to 51 per cent in single brand retailing came to India in January 2006.
The major provisions for FDI investment include that the minimum investment will have to be $100 million.
Retail stores would only be allowed in cities with more than one million people. It will be mandatory for retailers to source a minimum 30 per cent of the value of manufactured goods, barring food products, from small and medium enterprises. Investment up to 50 per cent will have to be in storage and back-end infrastructure.
A decision on FDI in the retail sector had been delayed in view of concerns that it would adversely impact domestic kirana shops, which account for over 90 per cent of retail trade. But, the advocates of the FDI say the conditions imposed by the government for investing in the sector will serve as sufficient safeguards for small retailers.
Besides, it is also expected to bring enhanced employment opportunities, especially in rural India, lend the retail sector to organised investment, and enable technology and infrastructure to permeate in the highly fragmented sector. CII president B Muthuraman said, “multi-brand retail will benefit the consumers, producers (farmers) and small and medium enterprises and generate significant employment. It will open up opportunities for expansion of organised retail and allow substantial investment in backend infrastructure. ”