Business, Economics and Jobs

India to consider 51% FDI in retail soon


Indian protestors shout slogans as they burn an effigy symbolizing Walmart during a protest organised by traders in New Delhi, 09 August 2007. Dozens of protestors demanded that US retail giant Wal-Mart not be allowed into India. Indian telecom firm Bharti Enterprises and US-based retail giant Wal-Mart announced 06 August 2007, a 50:50 joint venture for a new chain of wholesale stores in India to serve small retail shops.

A high-powered government committee will soon begin deliberations on when and how to loosen restrictions on foreign direct investment in multi-brand retail, a move that would allow companies like Wal-mart and Carrefour to take a more aggressive role in the Indian market, reports NDTV.

Don't hold your breath waiting for an actual bill.  The "51% FDI watch" is an ongoing game for India's business writers, and this one has been recommended and predicted countless times by the department of industrial policy and promotion (DIPP), a division of the ministry of commerce.  (For more details, see my article on Wal-mart's struggles in India here).

But according to NDTV's sources, there should soon be some more visibility on what the nuts and bolts of the regulations will be when the government eventually does loosen restrictions.

Here's the dope:

According to sources, important proposals that are to be taken up at the CoS meet include allowing FDI in multi brand retail, up to 51 per cent in a phased manner. The proposal says that at least 50 per cent of the total FDI proposed by an investor should be in back-end infrastructure for which a statement of accounts would be filed with RBI with a copy to Foreign Investment Promotion Board, disclosing clearly that at no point in time, investment in back end infrastructure is less than 50 per cent.

The proposal mentions that investment in such back -end infrastructure need not necessarily be made by the same entity that is making the FDI. Investments could also be made separately by an outsourced entity, specifically commissioned for this purpose.

On the limit of investments, proposal says that minimum FDI to be brought in into a project with multi brand retail would be $100 million and that front end retail outlets will be set up only in those states where the states agree to allow FDI in multi-brand retail under this policy. The SME [small and medium enterprise] sector proposal says that atleast 30 per cent of the value of the manufactured items procured (excluding food products) should be sourced from SME sector. Also Retail sales location may be set up only in cities with a population of more than [a million people] (2011 census).