Indian Gov’t Meets with Global Retailers to Review FDI Policy

June 28, 2013 Posted by India Briefing Reading Time: 2 minutes

Jun. 28 – Representatives from the Indian government met with foreign and domestic retailers this week to reevaluate its foreign direct investment policy. India’s Commerce and Industry Minister Anand Sharma liaised with leaders from companies such as Walmart, Tesco, Carrefour, Bharti, Aditya Birla Group, Tatas, Reliance and Pantaloon.

Sharma stated that the purpose of the meeting was “to interact with multi-brand retailers [and] potential investors, some of them [having] established a presence in India in the back-end or through setting up sourcing establishments.”

Sharma also added that India would uphold its policy to make it mandatory for multinationals to source 30 percent of their products from small and medium-sized enterprises (SMEs). However, Bharti Enterprise, part of a joint venture with Walmart, proposed that this regulation should not be mandatory to allow for greater sourcing flexibility.

The current policy also states that foreign retailers must invest at least US$100 million when looking to enter the Indian market, 50 percent of which must go towards back-end infrastructure. In response, global retailers demanded that foreign firms be mandated to invest 50 percent into their back-end infrastructure only during the first tranche of investment.

Furthermore, the Indian government only allows up to 51 percent foreign investment in multi-brand retail, and imposes cumbersome conditions on such decisions. However, the Department of Industrial Policy and Promotion is now considering lifting the FDI cap in multi-brand retail sector to 74 percent.

To allow retail companies a greater presence in India, the government will also review guidelines that allow foreign retailers to set up only in the country’s 50 or so cities with populations of a million people or more.

“It was important for the government to hear where the areas or the issues are which may require some more clarity. We have sufficient space to address those concerns, bring in the clarity and an early and appropriate view will be taken so that the guidelines can accordingly be given out,” said Sharma.

Retailers are eager for Sharma to come back to them with substantive policy clarifications.

“If clarifications are received quickly, then there will certainly be greater interest amongst international retailers to invest in this country,” said Reliance Retail president Biju Kurien.

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