State nod for FDI in multi-brand retail

State nod for FDI in multi-brand retail

After much soul-searching, Karnataka on Wednesday joined 11 other states and Union Territories who have agreed to allow foreign direct investment (FDI) in multi-brand retail ventures in the State.

“Karnataka has also favoured the policy,” Department of Industrial Policy and Promotion Secretary Saurabh Chandra said on Wednesday.

The state government’s move is expected to pave the way for several multinational corporations to set up shop in the state which will directly spur infusion of fresh capex and high-end technological innovations not only to benefit domestic players but also create a good experience for the consumers.

Chief Minister Siddaramaiah is learnt to have written to the Union commerce minister last week expressing willingness to allow opening up companies which have 51 per cent FDI. These are basically multi-brand retail companies and the commerce ministry has approved it, Chandra told Deccan Herald.

It was not clear whether the chief minister had set any conditions to allow FDI in Karnataka.
Welcoming the state’s stand, BCIC President Lakshminarayan said this would not only induce a surge of retail activities in the state, but also boost employment which will ultimately benefit the consumers and bolster the state’s economic growth.

The change in Karnataka’s stand on allowing FDI in multi-brand retail is said to be the fallout of the recent change of government. The previous BJP-led government was against implementing FDI in multi-brand retail in the state, with the BJP criticising the policy on the grounds that it would destroy the livelihood of millions of retailers.

The government had permitted up to 51 per cent FDI in multi-brand retail last year. Earlier this month, Himachal Pradesh opened doors to 51 per cent FDI in multi-brand retail. Maharashtra, Andhra Pradesh, Haryana, Rajasthan and Manipur are among the states that have decided to implement the decision.

However, the Foreign Investment Promotion Board (FIPB) has so far not received any proposal from global retailers for investment in multi-brand retail after the curbs on foreign investment in this sector were lifted in September 2012. Even Walmart, which has a 50:50 joint venture with Bharti group, had planned to file an application with FIPB, but hasn’t acted on its intentions. Others who are yet to make up their minds on their India plans are French retail giant Carrefour, which has not identified a partner in India so far, and Tesco, which has a tie-up with Tata group.

It remains to be seen if these retailers will move ahead on their plans if the FDI limit is raised to 74 per cent from 51 per cent, as recommended by a government panel.

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