FDI in multi-brand retail may open with 51% cap

Politically-sensitive multi-brand retail sector is likely to be opened for foreign investors with an FDI cap of 51 per cent, as efforts are being made by the industry ministry to evolve a consensus on the vexed issue.

According to sources, the government will have to allow a minimum of 51 per cent foreign direct investment (FDI) in the multi-brand retail, the same as was permitted in single brand retail.

FDI in multi-brand retail below 51 per cent was not feasible, as it would lead to "arbitrage" opportunities, sources said. However, they did not elaborate on arbitrage opportunities.

Yesterday, Planning Commission Deputy Chairman Montek Singh Ahluwalia favoured opening up of the multi-brand retail sector to foreign investors, saying it will benefit farmers and also help in containing food inflation.

Food inflation fell to 15.52 per cent in the week ended January 8.

The demand for opening up the sector has been intensifying, especially in the wake of wide gap between the wholesale and retail prices.

The Department of Industrial Policy and Promotion (DIPP) is studying the report submitted by an expert committee, which has evaluated the stakeholders comments on the issue.

The DIPP had floated discussion papers on opening FDI in multi-brand retail and increasing it in defence production.

Retail giants like US-based Wal-Mart and French Carrefour are very keen to enter in the segment. Bharti Enterprises and Wal-Mart Stores entered into a joint venture in August 2007 and started cash-and-carry stores named 'BestPrice Modern Wholesale' in 2009.

At present, 51 per cent FDI is permitted in single brand retail, while 100 per cent is allowed in the wholesale cash-and-carry segment.