FDI in multi-brand retail may go to Cabinet

Industry Ministry's proposal to open multi-brand retail for foreign investment is likely to go to the Cabinet soon after assembly election results of four states and a Union Territory, taking on board job-related concerns of the Labour Ministry, sources said.

The Cabinet note, circulated by the Department of Industrial Policy and Promotion (DIPP) has a rider that foreign retail giants will have to invest a minimum of $100 million, half of which must go to the back-end infrastructure like cold storage, soil testing labs and seed farming.

In the event of the proposal getting approved, multi- national retailers like Wal-Mart, Carrefour and Tesco which have been awaiting the government's decision, would be allowed in  cities with population of over one million (according to 2001 census).

As per this criterion, the foreign chains would be able to open shops in 36 cities only, sources said.

This rider would take care of concerns expressed by the ministries of labour and rural development over the impact of the big foreign retailers on the small kirana shops, they said.
    
Asked how soon the decision could be expected, they said, "The government is waiting for election results of the five assembly elections. After that the decision would be taken".
    
The issue is politically sensitive, as some of the political parties like the Left, have been opposing the move."
    
At present, India allows FDI only in single brand retail chains like Nike, Louis Vuitton with a cap of 51%. It also permits 100% overseas investment in wholesale cash-and-carry format.
    
Several of the big chains like Wal-Mart and Carrefour have set up their joint ventures in India, waiting for their full-scale entry into the multi-brand retailing.
    
A discussion paper on opening of the sector has been in the public domain since July 2010 and the stakeholders have submitted their feedback.
    
India's total retail sector is estimated at $590 billion, of which unorganised is at $496, according to an Icrier report.
    
Opening of the multi-brand retail to foreign investment is expected to revive the investor confidence in the country.
    
Foreign direct investment has dipped by 25% between April-February of 2010-11, while concerns over sustaining robust economic growth of over 8.5% have surfaced in the backdrop of inflation.
    
Besides, the India Inc confidence has also been dented because of a spate of scams such as 2G telecom spectrum and Commonwealth Games.