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51% FDI in Multi-Brand Retail Proposed

July 7, 2010


Foreign Retail Investment in IndiaCurrently the Indian Government allows Foreign Direct Investment in the retail sector in single brand outlets only. Multi Brand retailers are operating with an Indian partner. The Government has now proposed to allow 51% FDI in Multi Brand Outlets – This means Costco, Sams Club, Careefour etc can now directly retail to the Indian consumer.

A copy of the proposal was sent to us inviting our comments and here is our tat ke on the Government’s proposal.

The paper elaborates the potential benefits of FDI (differentiating it from domestic capital), (1) improvement in supply chain, (2) skill development, (3) opportunity for greater sourcing from India, and (4) productivity improvement and growth in market size etc.

The paper cites the success of FDI in cash & carry business (wholesale) bringing in US$1.8 bn of investments between 2000 and 2010; however, FDI in single brand retail—permitted in 2006—attracted FDI of (only) US$194 mn between 2006 and 2010. This means Foreign Companies are not interested in Indian Partners and want to go Solo.

The Government first wants to hear your voice on investment required? Compulsory investment in back-end logistics? Reservation of jobs in organized retail for rural youth? Minimum percentage of procurement from SME sector ? FDI to cities with population of >1 mn (including 10 kms around the city limits)?

We view the recent discussion paper inviting the views of industry on FDI in multi-brand retail as a positive for the retail sector. You can post your views as comments and they shall be sent to the Government. Jagoo Grahak!

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