19.11.11

FDI in multi brand retail

The UPA government is all set to open up the multi-brand retail segment to foreign investment but has not yet decided on the exact timing of the move. The Department of Industrial Policy Promotion (DIPP) has moved a Cabinet note which seeks to open the multi-brand retail sector to foreign retailers such as Wal-Mart, Carrefour, Tesco and others, who are keen to enter the lucrative Indian market. Sources say the DIPP has backed 51% FDI in the sector and has also argued for raising the cap on single brand retail to 100%. Several stiff riders have been added in the proposal for FDI in multi brand retail to protect the interest of small kirana stores, who fear they will be wiped out once the retail giants enter the sector. Officials said the government was now engaged in building consensus both within and outside the coalition on the issue to ensure safe passage of the long-delayed reform. They said some have voiced concern about whether the sector should be opened up before the key elections in Uttar Pradesh. The government now allows 51% FDI in wholesale cash-and-carry where global players such as Wal-Mart and Carrefour are only allowed to sell to bulk customers such as hotels, canteens and even local retailers. A government panel headed by chief economic adviser in the finance ministry Kaushik Basu had recommended opening up the multibrand retail sector and reforming the Agriculture Produce Marketing Committee Act (APMC) Act to tackle stubbornly high food inflation. Policymakers say foreign retailers will bring in technology and invest in setting up logistics chains and warehousing which will cut down on wastage and improve supplies. The move to open up the multibrand retail sector has been pending for seven years due to stiff opposition from political parties, trade unions and traders. A panel of secretaries had also given the nod to open up the sector. Policymakers say opening up multi-brand retail would help dispel doubts about the government’s ability to push through economic reforms and help attract much-needed foreign investment. In the past few days the government has taken several steps to fast track approvals to deflect criticism that decision making had stalled against the backdrop of the series of scandals that had emerged since last year.

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