FDI in multi-brand retail: Secys to meet on July 22

Secretaries will meet on July 22 to finalise a blue print on allowing foreign investment in the multi-brand retail sector for political clearance.

The Committee of Secretaries (CoS) headed by Cabinet Secretary Ajit Kumar Seth would try to resolve inter-ministerial differences on issues like fixing a cap on FDI in the sector and regulatory framework, sources said.

While officials will formulate the policy, the decision to open the sector for FDI has to be taken by the political leadership.

While the Department of Industrial Policy and Promotion (DIPP) is in favour of allowing 51% FDI in the sector, the Department of Consumer Affairs wants to cap the foreign direct investment at 49%.

DIPP had proposed other riders as well. These include a minimum FDI of $100 million (about Rs 450-460 crore), half of which must be invested in the back-end infrastructure like cold storage, soil testing labs and seed farming.

On the other hand, the Department of Consumer Affairs wants that 75% of the FDI should be invested in the back-end infrastructure.

Last year, the DIPP had initiated a debate on allowing FDI in the multi-brand retail sector that is dominated by mom and pop shops.

An Inter-Ministerial Group on inflation, constituted by Prime Minister Manmohan Singh, too has pitched for opening the sector to foreign retailers to check the rate of price rise.

At present, India allows FDI only in single brand retail chains like Nike and 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 are waiting in the wings for full-scale entry into the multi-brand retail.

India's total retail sector is estimated at $590 billion, with unorganised sector accounting for $496, according to an Icrier report.

The government's policy on retail investment will also help in boosting the country's FDI, which declined by 25% to $19.42 billion in 2010-11 from $25.83 billion in the previous fiscal.