Foreign direct investment (FDI) in multi-brand retail is a politically contentious subject. While the economic case for FDI in multi-brand retail is clear, politicians are simply not interested in crafting a clear and coherent policy.
There are reports of stiff riders in permitting FDI in this area. News reports suggest that foreign investors will have to compulsorily purchase 30% of their requirement of processed and manufactured goods from “small industry”. This will make complete nonsense of multi-brand retail being a tool in the fight against inflation. Small industry is by nature inefficient: it does not have the required economy of scale to confer price advantages that make multi-brand retail attractive. Inflation will then be imported into these retail chains through the back door. Benefits from retail chains will only arise if they are free to procure what they need, from wherever.