Draft cabinet note on FDI in multibrand retail circulated

The Industry Ministry has circulated a draft Cabinet note for allowing foreign direct investment (FDI) in multi-brand retail, a move which will allay industry's concern over policy paralysis.

The draft note circulated for inter-ministerial consultations is in line with the recommendations of the high level committee of secretaries, headed by Cabinet Secretary Ajit Kumar Seth.

"The note has put in detail comments similar to those made by the the Committee of Secretaries. All the concerned departments will send their comments within two weeks," an official in the Department of Industrial Policy and Promotion (DIPP) said. The note was circulated by DIPP last week.

He said that decision on hiking the cap of foreign direct investment in single-brand retail is also expected soon. At present, the country allows 51% FDI in single brand retail, 100% in cash and carry (wholesale) business, but bars it in multi-brand retail.

The decision on multi-brand has been delayed, as there were concerns over its impact on the neighbourhood kirana shops, which account for over 90% of $590 billion retail trade. These concerns have been voiced by several political parties and traders' unions.

But industry leaders, including Reliance Industries' Mukesh Ambani and Wipro's Azim Premji have expressed their worries on the "policy paralysis" which has affected decision-making in the government, following several scams hitting it.

The CoS had recommended allowing 51% FDI in the politically-sensitive sector with several riders. These included a minimum foreign investment of $100 million.

It also recommended that at least 50% of the investment and jobs should go to rural areas and the entities with FDI should source at least 30% of their requirements from the MSME sector.

Several global retailers like Wal-Mart are waiting in the wings for a full-scale entry into India's multi-brand retail segment.

Another condition suggested by the CoS was that half of the minimum overseas investment should be in developing back-end infrastructure like warehousing and cold storage.

Besides, the global chains should be allowed only in 36 large cities which have population of over one million.

However, the retailers should be allowed to open shop even within 10 km radius of these cities, as there are space constraints in the big townships.