India to Further Liberalize FDI in Multi-Brand Retail

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Jun. 21 – India may further liberalize its multi-brand retail investment policies so that it can attract foreign retailers into the country. Last year India began to allow up to 51 percent foreign direct investment (FDI) in multi-brand retail, but it is yet to receive any investment proposals. This week, however, a committee headed by Economic Affairs Secretary Arvind Mayaram proposed to increase the FDI cap on multi-brand retail to 74 percent.

The Department of Industrial Policy and Promotion also issued clarifications relating to sourcing and back-end investments regarding India’s multi-brand retail FDI policy last week. The Department specifically clarified that foreign retailers may not franchise any front-end stores, that they must place 50 percent of their investments in their back-end infrastructure and that their front-end stores must source 30 percent of their items (except fresh produce) from micro, small and medium-sized companies. In addition, there is an investment minimum of US$100 million.

“If there are any other issues [global investors] have in mind, the government is receptive to them…because the objective of the policy is to attract FDI,” stated Indian Commerce & Industry Minister Anand Sharma.

He also noted that multi-brand retail FDI proposals “will be fast-tracked.”

To further boost inflows Sharma added that the Ministry of Commerce & Industry would advise the Cabinet to further liberalize other sectors as well, such as the allowance of 100 percent FDI in the telecoms, private security and aviation sectors (currently capped at 74, 49 and 49 percent, respectively) and raising the caps on the defense, public banks and radio and print media sectors to 49 percent (all are currently capped at less than 30 percent).

The Indian retail industry grew 10.6 percent between 2010-2012 to US$500 billion, and it is expected to reach US$1.3 trillion by 2020.

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