FDI in multi-brand retail likely after state poll results

A Cabinet note has been circulated with a proposal that a minimum foreign direct investment of USD 100 million (about Rs 450-460 crore) would be required and half of it must be invested in the back-end infrastructure like cold storage,soil testing labs and seed farming.

The note has been circulated by the Department of Industrial Policy and Promotion (DIPP),the nodal arm for investment in the Commerce and Industry Ministry.

“I think the government is waiting for election results in five states. Maybe,after that the decision would be taken,” a senior official said adding the issue is politically sensitive.

At present,India allows FDI only in single brand retail chains like Nike,Louis Vuitton with a cap of 51 per cent. It also permits 100 per cent 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 in the wings 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.

Since there are still some apprehensions over the impact of the entry of giant retailers on the small kirana shops,the government wants to open the sector with riders like back-end investment,the sources said.

India’s total retail sector is estimated at USD 590 billion,of which unorganised is at USD 496,according to an Icrier report.

FDI in India has dipped by 25 per cent between April-February of 2010-11,while concerns over sustaining robust economic growth of over 8.5 per cent 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.