India May Soon Allow 100% FDI in Single-Brand Retail

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Nov. 1 – Comments made by India’s Commerce and Industry Minister Anand Sharma on Friday imply that India is likely to allow 100 percent FDI in the single-brand retail sector, a move that, if made, would encourage companies such as IKEA to do more in India than simply purchase source materials and intermediate products.

IKEA’s CEO, Mikael Ohlsson, met with the trade minister last month and raised the issue of further liberalizing the single-brand retail industry personally.

“It will create jobs in India. The government is considering it,” Sharma told the Indian Express.

Although IKEA already purchases US$655 million worth of products from India annually, the current limit of 51 percent FDI in single-brand retail has discouraged the Swedish firm, which had roughly US$1 billion on hand to spend at one point, from fully making inroads into the Indian market.

Sharma also mentioned that the Indian government was reviewing feedback on a paper it floated on allowing FDI in the multi-brand retail sector; it currently does not allow any. He said opening the sector up would promote infrastructure, technology, and local employment. It would also promote backward linkages in industries such as refrigeration that would help Indian farmers and decrease India’s food scarcity problems, he added.

Although India’s defense budget imports 70 percent of its intermediate technology, only 26 percent FDI is permitted.