R-Day reforms: Single-brand retail opened to foreign funds

The approval, after the Group of Ministers on FDI referred it to the CCEA, showed the government’s will to attract investment while protecting the interest of small retailers in the country.

“This in any way does not cause any replacement or displacement as it is already happening through franchise,’’ said Commerce Minister Kamal Nath. ‘‘Retailing of goods of multiple brands, even if such products are produced by the same manufacturer, would not be allowed.’’

Currently, single-brand retailers operate through the franchisee route and there is a strong view that FDI in this segment won’t displace jobs or impact the local industry but help create employment.

However, unlike other sectors where FDIs is being allowed without bureaucratic approvals on the automatic route, FDI in retail would be permitted after a nod from the government. “There would be no restriction on the number of retail outlets but guidelines would be framed to fix the norms of entry,’’ said Nath who is attending the Davos meet.

The Cabinet also removed multiple layers of approval while liberalising existing sectors and opening new ones such as power trading, processing and warehousing of coffee and rubber to foreign investment. “This is the first time in 15 years that the whole FDI policy has been reviewed in an integrated manner to remove anomalies and inconsistencies. This is not so much an exercise to revise caps, as to simplify and rationalise the procedures,’’ said a government statement. The Cabinet also expanded FDI to 100 percent under automatic route in diamond and coal mining, development of new airports, cash and carry wholesale trading and export trading, and laying of gas pipelines.

It has raised FDI to 100 percent in petroleum infrastructure and captive mining of coal and lignite for consumption by eligible users. Subject to other regulations, it has allowed 100 percent FDI in distillation and brewing of potable alcohol, industrial explosives and hazardous chemicals. In line with the GoM recommendations, it has decided to do away with the disinvestment norms in business-to-business e-commerce where a foreign investor had to shed 26 percent equity to an Indian investor within the first five years of operations.