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New Delhi: The government is once again pushing for foreign investment in the retail sector, albeit in a calibrated manner. In a new strategy being drawn up by the department of industrial policy and promotion (DIPP), foreign direct investment in single brand retail could be hiked to 74% from 51% now.
During the UPA-I regime, the government had tried to increase the FDI in single brand retail to 100% but couldn’t. As an alternative, it had tried to bring in 51% FDI in multi-brand speciality retail segments like sports goods and stationery, but that too didn’t get off the ground.
If the current move succeeds, it would benefit international brands like Marks & Spencer, Nike, Adidas, Benetton, which have set shop in the country through joint ventures and franchisees.
“The idea is to slowly uncap the sector, in a calibrated manner. Retail is a sensitive issue as it involves large corporations and general public as well. The government is committed to inviting FDI into one of the world’s most attractive retail market but it would like to go slow and not against the public opinion”, an official involved in the process told FE.
“With 26% (with Indian partners), the Indian partners would still have special powers, and all control would not pass into the hands of the foreign player, so we do not expect much resistance from any corner,” the official said.
The government would not attach any riders while increasing the FDI in single brand retail. Earlier, when working at allowing 100% FDI in single brand retail, DIPP had proposed a set of riders. For instance, an international brand would then have to source 50% of the projected sales from the country. If it fails to meet the norm, within five years it would have to divest 51% stake in favour of domestic investors.
However, there is no move to touch the multi-brand retail segment, where no FDI is allowed. In fact, there the approach is to further tighten the norms to ensure that there are no back-door entry via the new FDI policy, which relaxes foreign investment into downstream sectors if routed through an Indian-owned and controlled holding company. The government had commissioned a study in 2007 by the economic think-tank Icrier on the impact of organised retailing on the unorganised sector. The report gave a go-ahead to large Indian corporations and possible FDI into the sector. According to the study, the country’s retail trade would...
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