Foreign firms can set up food-retail hubs

Government said it decided to permit 100% FDI under government approval route for trading, including through e-commerce

The government on Monday made it easier for Walmart, Marks and Spencer and Tesco, among others, to set up food manufacturing and food-only retail bases in India, by allowing 100 per cent foreign direct investment (FDI) in the sector.

“Companies like Walmart and Tesco may look to embrace this new policy through a special purpose legal entity for trading in specific product category,” said Amarjeet Singh, partner–tax, KPMG in India. The government note said: “It has now been decided to permit 100 per cent FDI under government approval route for trading, including through e-commerce, in respect of food products manufactured or produced in India.” Until now, there were restrictions on multi-brand retailing, though 51 per cent in single brand retail and 100 per cent FDI in the cash-and-carry or wholesale business were permitted.

The government said it decided to permit 100 per cent FDI under government approval route for trading, including through e-commerce, in respect of food products manufactured or produced in India.

Lalit Malik, chief financial officer of Dabur India, said: “100 per cent FDI is a welcome step and it will be beneficial for the industry. It will go a long way in expanding the e-commerce network in India.”

Experts said the move would help home-grown players in the food processing and e-commerce sectors gain access to foreign funds. “I think it will help both foreign as well as Indian companies who are into e-marketing to access foreign funds and help in promoting food products manufactured and produced in India. I expect some specialised e-market platforms dealing only in agri and food products might also come up with FDI,” said Gokul Patnaik, Global AgriSystem Private Limited.

How would it help e-grocers such as Grofers and Big Basket? Experts said they would have to look at changes in the FDI policy in detail before clarifying this.  Biju Kurien, member of the advisory board at L Capital and former chief executive at Reliance Retail, said foreign retailers would find it attractive to invest in Indian food retail here.