New Delhi: A panel of secretaries is likely to approve Friday a final blueprint for allowing FDI in India’s multi-brand retail sector, but with tough riders.
These could include preconditions like a minimum investment of $100 million and earmarking a sizeable portion of the funds for back-end supply chains.
The Committee of Secretaries (CoS) headed by cabinet secretary Ajit Kumar Seth is also expected to resolve the differences on fixing a cap on FDI in the politically sensitive sector.
While there is almost a consensus among the top bureaucrats for allowing at least 49% foreign investment in multi-brand retail joint ventures, the department of industrial policy and promotion (DIPP) is pushing for a majority stake for global partners like Walmart and Carrefour, sources said.
The final clearance by the secretaries will have to be endorsed by the UPA leadership, which is likely to weigh the pros and cons of the move, especially ahead of the Uttar Pradesh Assembly elections scheduled next year.
The DIPP had also proposed riders like a minimum FDI of $100 million (about Rs 450-460 crore), half of which would have to be invested in back-end infrastructure like cold storage, soil testing labs and seed farming.
On the other hand, the department of consumer affairs wants 75% of the FDI to be invested in back-end infrastructure.
Last year, the DIPP had initiated a debate on allowing FDI in the multi-brand retail sector, which is dominated by mom-and-pop stores.
An inter-ministerial Group on inflation constituted by Prime Minister Manmohan Singh, too, has pitched for opening the sector to foreign retailers to check the rate of price rise.
At present, India allows FDI only in single brand retail chains like Nike and Louis Vuitton, with a cap of 51%. It also permits 100% overseas investment in wholesale cash-and-carry format stores.
Several big chains like Wal-Mart are waiting in the wings for a full-scale entry into the multi-brand retail segment. India’s retail sector is estimated to be worth $590 billion, according to an Icrier report.
The government’s policy on retail investment will also help in boosting the country’s FDI, which declined by 25% to $19.42 billion in 2010-11 from $25.83 billion in the previous fiscal.