Prime Minister Narendra Modi on Friday chaired a meeting to review the foreign direct investment (FDI) regime in the country, in which further liberalisation in key sectors, including retail and construction, is learnt to have been discussed. According to a proposal, India is considering allowing 100% FDI in multi-brand retail, which will allow retailers like Wal-Mart and Carrefour to set up their own outlets without a local partner. However, this will be permitted on the condition that foreign retailers will sell only those items produced in India and create massive jobs. Most of the other conditions, such as a minimum investment of $100 million and at least $50 million on storage and logistics infrastructure, are applicable even now for multi-brand retail.
Other proposals relating to the retail sector include allowing 100% FDI in single-brand retail through the automatic route. Currently, only 51% FDI is allowed in multi-brand retail via the government route. Similarly, while 100% FDI is allowed in single-brand retailing, any such investment beyond 49% needs government approval. In construction, one of the proposals relates to allowing FDI in even undeveloped and underdeveloped plots in a project, albeit with certain conditions. The government currently permits 100% FDI in only developed plots where the basic trunk infrastructure is in place. There was also a proposal to further liberalise FDI in print media.
The meeting was attended by commerce minister Nirmala Sitharaman, according to sources. The move to further liberalise the multi-brand retail sector was initially opposed by the BJP during the UPA regime. However, as demand for jobs started growing and India became a more attractive destination for foreign companies, the government seems to have eased its opposition to such a move. The proposal to ease rules has other riders attached. Retailers will have to spend at least $50 million on storage and logistics infrastructure and employ 1,000 people for every $100 million of investment, apart from sourcing 30% of their products from small companies, the people said. The food processing ministry has also been pushing to partially ease rules for retailers that would allow them to sell soaps, shampoos and toothpastes along with food products. India’s food and grocery market is the world’s sixth largest, with retail contributing 70% of sales.
The Modi government has already announced two big rounds of relaxations in the FDI regime, first in November 2015 and then in June last year, easing rules in over a dozen sectors ranging from real estate, pharmaceuticals, food marketing, aviation and defence to e-commerce and banking. Presenting the Budget for 2017-18, Jaitley had said the government would be considering further relaxing FDI rules to make it even easier for foreign companies to invest in India.