Opening India’s multi-brand retail sector to foreign direct investment (FDI) just got closer. The Prime Minister’s Office (PMO) has thrown its weight behind other supporters of the move including the Planning Commission, department of consumer affairs, commerce & industry ministry and the agriculture ministry. Sources said the government is likely to come out with a proposal shortly, which may allow FDI up to 51% in multi-brand retail. The move aligns with the calibrated approach to opening the sector with a string of caveats to ensure that more jobs are created and that kirana stores are not harmed.
Planning Commission deputy chairman Montek Singh Ahluwalia said on Tuesday that the panel was in favour of allowing FDI in multi-brand retail. ?If we are open to modern retail formats, then why should we not allow foreign direct investment in multi-brand retail?? Singh wondered at the economic editors’ conference here. ?There is nothing wrong with modern retail formats,? he added.
Bentonville, Arkansas-based MNC retailer Wal-Mart’s CEO Mike Duke had said on Monday that he was satisfied with India’s calibrated approach towards opening the sector. Duke, who met Singh Saturday, also said he had received positive response from Indian officials.
Earlier in the day, food processing minister Subodh Kant Sahay said he expected the sector to be opened to FDI by next year.
Indian regulations permit 51% FDI in single-brand retail and 100% in cash & carry stores, which are back-end outlets permitted to sell only to registered retailers.
US President Obama, who will be in India from November 7 to 10, is expected to persuade the government to open multi-brand retail to foreign investment.
?All government departments have more or less agreed to allow FDI in multi-brand retail in phases, as a step-by-step approach would ward off resistance from kirana stores and other opponents of the move. The move would gain further momentum after President Obama?s visit,? an official said.
As earlier reported by FE, the government has added an element of social benefit to its retail plan. Initially, only those foreign retailers who first invest in supply chains and other related back-end infrastructure would be allowed to set up multi-brand retail outlets. The idea is that the firms must have already created jobs for rural India before venturing into multi-brand retailing. This would benefit retailers like Wal-Mart and Germany?s Metro. Wal-Mart operates a 50:50 cash & carry joint venture in India Bharti Retail, while Metro has fully-owned stores.
Another caveat could be a proposal from the consumer affairs ministry that FDI up to 49% in multi-brand retail is welcome but it should compulsorily be through infusion of fresh capital ? 75% of which is spent on back-end infrastructure, logistics and technology upgrade.
The move towards opening multi-brand retail to FDI began in June this year when the department of industrial policy and promotion floated a discussion paper to elicit views from all stakeholders.