NEW FDI RULES EXPECTED

There are indications from the Goverment of India that a new policy on foreign direct investment in the politically sensitive multi-brand retail sector will soon be announced. Currently FDI is not allowed in the lucrative retail sector  in India. The retail sector today employs 33 million people and is dominated by the Kirana Shops.

The Department of Industrial policy and Promotion (DIPP) has initiated a debate on this sensitive issue of allowing FDI in the multi-brand retail sector.

It received inputs from stakeholders, including business chambers, WalMart India and French retail major Carrefour, besides the wings of the government. The concept paper had favoured opening of the sector, subject to creation of back end logistics by the foreign retail stores. The committee comprises officials from ministries of Micro, Small and Medium Enterprises, Agriculture, Finance, Rural Development, Commerce and Industry and Consumer Affairs.

While multi-brand retail is closed for foreign investors, 51 per cent FDI is permitted in single brand retail while there are no restrictions on inflows in wholesale cash and carry format business. According to the discussion paper, India annually loses more than Rs 1 lakh crore (US$22.523 billion) in agri-products, including fruits and vegetables, due to lack of proper infrastructure like cold chain storage and warehousing. While there had been political resistance to the idea on the presumption that global players would swallow the small 'mom & pop' (kirana) stores, the industry has been pitching for allowing FDI in the retail sector.
Asia Pulse: October 12, 2010