Indian Ministries to Support 100 Percent FDI in Multi-Brand Retail

May 25, 2010 Posted by India Briefing Reading Time: < 1 minute

May 25 – India’s Commerce and Industry Ministry is likely to support a move to allow 100 percent foreign direct investment in multi-brand retail that could open the market further for multinational companies like Tesco and Wal-Mart.

The proposed paper will recommend strict domestic sourcing requirements and require investments in backward linkages with the official ruling on FDI caps to be finalized after more deliberation by authorities. “We are preparing the paper that will be placed for public debate in some time,” a senior official of the department of industrial policy and promotion told the Economic Times.

He said that though the earlier view within the department was to keep the FDI limit at 51 percent, it has veered around to keeping it much higher and even pegging it at 100 percent to have an intense debate on the subject.

The paper is also expected to make allowances that will lessen the impact of foreign competition on small retailers and allow local sourcing to benefit farmers. “The idea is that big multi-brand retail outlets should enable growth of small retailers and not threaten their existence,” the official said. Foreign retailers could be banned from opening in cities with less than one million people to shield small retailers.

Overall, more foreign investment inflows in the retail industry will boost food processing technology in the country. Based on industry estimates the country’s underdeveloped cold chains waste around 40 percent of the farm produce.