One More Step towards FDI in India’s Multi-Brand Retail

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Aug. 10 – Multi-brand retailing, perhaps the most vital issue of the new century in terms of FDI in India, has gone ahead by one more step. The top notch secretaries of the Indian government have forwarded 10 recommendations to the Commerce and Industry Ministry.

According to government officials, the ministry is evaluating it and would soon take the proposal before the Cabinet.

The Commerce and Industry Minister Anand Sharma has stated that an early decision on opening up the sector for FDI would be taken after he formally gets the recommendations. The Committee of Secretaries (CoS) headed by Cabinet Secretary Ajit Kumar Seth has advocated that 51 percent FDI could be permissible in the sector, which is dominated by local grocery stores. The CoS has also proposed that at least 50 percent of the investment and jobs should go to rural regions.

Also, the entities with FDI should source at least 30 percent of their requirements from the MSME sector. An overseas player would also need to commit to at least a US$100 million investment.

The other proposals, permitting such super stores to sell non-branded items, should be permitted only in towns with population of over 10 lakh. Currently, India permits 51 percent FDI in single brand retail and 100 percent FDI in the cash and carry format of the business.

The Department of Industrial Policy and Promotion opened a debate paper on opening of the politically sensitive multi-brand retail last year.

Once the Cabinet approves the suggestions to permit FDI in this sector, foreign players like Wal-Mart, Carrefour and Tesco can structure joint ventures with Indian companies to open multi-brand retail outlets.

India’s central government prepares rules and regulations for FDI and the joint venture firms would have to request permission from state governments (as per the Shops and Establishment Act) to open stores.

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