Apr. 12 – India is considering opening multi-brand retail to more foreign direct investment with the Department of Industrial Policy and Promotion (DIPP) in talks with the Finance and Agricultural Ministry on the issue.

“The move to open up retail sector is part of the government’s strategy to plug gaps in the existing food supply chain and more importantly, help bring down the difference between farm-gate prices and retail prices,” a high ranking top DIPP official told The Economic Times.

Currently, India allows as much as 51 percent FDI in single-brand retail. Investors wanting to enter the multi-brand retail market are only allowed through partnerships and franchise agreements with domestic companies. “The proposed cap will be decided after consultations with the agriculture ministry but it is likely to be at 49 percent,” the official added.

One such entity that has opted for the franchise route is Hamleys, the famous 250 year-old British toy store from London’s Regent Street. The company plans to open up 20 stores across the country in its franchise arrangement with Reliance Industries catering to an estimated 300 million Indian children below the age of 15.

Major foreign retailers have long wanted to enter the Indian market but the retail sector is strictly restricted because of its feared impact on the economy. The sector is the second-largest employer in the country and a flood of foreign competition may lead to many people losing their jobs.

The government is deliberating on the advantages of allowing FDI in multi-brand retail as a way of improving the supply-chain process and boosting agricultural earnings.

“It (opening retail trade) will help in bringing down the considerable difference between the farm gate prices, wholesale prices and retail prices,” Finance Minister Pranab Mukherjee said during his budget speech.