Foreign companies will now be able to set up stores to market food products procured from domestic manufacturers
The domestic food processing industry may get a boost with the Budget providing for 100% FDI via the Foreign Investment Promotion Board (FIPB) route in marketing of food products manufactured in the country. Industry analysts say the measure paves the way for foreign investment in the largely fragmented domestic food processing industry dominated by small players who often don’t have the financial muscle to reach newer markets.
Under current regulations, while 100% FDI is allowed in processed food manufacturing, foreign investment is not allowed in trade of food products. Post this decision, foreign companies can set up stores to market food products procured from domestic manufacturers. The move is also aimed at curbing the huge wastage of food on account of lack of storage and food processing infrastructure, industry experts say. “Allowing 100% FDI for marketing of food products manufactured in India will help domestic producers increase their sales,” said Anil Talreja, partner, Deloitte Haskins & Sells India. “We need to see the fine-print to understand how exactly this is going to pan out but overall it’s a positive move for the industry,” Talreja added. The move is also expected to spur foreign players who are planning to produce in India but want to test the market first.
A section of the industry is also looking at the move as a precursor to further opening-up of the multi-brand retail sector for which there is a current FDI cap of 51%. “With regard to this move, it is still not clear whether this will be permitted for retail marketing or only wholesale marketing. In the event of this applying to retail marketing, it could be a prelude to further opening-up of multi-brand retail marketing, beginning with the food sector,” said Dhanraj Bhagat, partner, Grant Thornton India.