Multi-brand FDI: Walmart, Carrefour & Tesco May Soon Open Stores In India Subject To Stringent Inves.

Multinational retailers such as Walmart , Carrefour and Tesco may soon be allowed to open stores in India subject to stringent investment norms, sourcing conditions, and cap on number of outlets in big cities. The Department of Industrial Policy and Promotion, or Dipp, is likely to move a proposal seeking cabinet approval for 51% foreign direct investment (FDI) in multibrand retail subject to a minimum investment of $100 million.

In a bid to counter possible political opposition to the move, the proposal gives state governments the final say on whether they wish to have front-end retail stores in their states.

"A draft framework has been prepared keeping adequate safeguards to protect small shopkeepers, and to ensure that FDI actually helps in development of back-end infrastructure," a senior Dipp official told ET on condition of anonymity. The department has circulated a draft framework to a committee of secretaries, which will fine-tune it before a final cabinet note is moved.

The move comes a week after an inter-ministerial group, chaired by chief economic adviser in the finance ministry Kaushik Basu, endorsed opening up the sector to FDI. India, at present, allows 51% FDI in single-brand retail and 100% in wholesale cash-and-carry. The draft framework prepared by Dipp proposes at least half of the foreign investment in multibrand retail projects should be in back-end infrastructure.

Multinational retailers will have to file a statement of account with the RBI and Foreign Investment Promotion Board showing the investment in back-end functions.

Proposals address states' concerns

"The government is very clear that FDI in multi-brand retail should create large-scale employment and bring quality investment into the country leading to development of back-end infrastructure," the official said. According to industry estimates, lack of cold chains leads to a loss of about 40% of the country's farm produce, or Rs 50,000 crore, every year.

For easier monitoring, the government will also allow back-end infrastructure to be executed through a dedicated entity. Multi-brand retail stores would be required to source at least 30% of their products, including food items, from small and medium enterprises, according to the draft framework.

Source : economictimes.indiatimes.com