Walmart, Tesco Entry Just a Matter of Time, Cabinet Note on FDI in Retail Moved.

NEW DELHI: India may throw open its doors to multi-brand transnational retailers such as Walmart and Tesco, with the government finally mustering the political will on the policy initiative that has been stalled for years.

The industry ministry has moved a proposal before the prime minister's office and relevant ministries, a senior government official told ET. "A cabinet note has been floated and a decision can be expected soon," the official said.

While the move will help attract FDI at a time when inflation is high and the economy is slowing, the government may opt for a phased roll-out to take the sting out of the political opposition. Bharatiya Janata Party and the Left parties have vehemently argued that FDI in multi-brand retail will throw small shopkeepers and traders out of business.

The policy may be rolled out from the big metros, though the draft note says that the stores could come up in cities with population of more than 10 lakh, a government official said.

The draft cabinet note, which has proposed a maximum 51% FDI in the sector, already has sweeteners such as mandatory sourcing from small farmers and small and medium enterprises to create support among certain segments.

Foreign investors will also have to ensure at least 50% of total investment in 'back-end infrastructure'.

The cabinet note follows a strong backing for foreign direct investment (FDI) in multi-brand retail at a recent meeting of the government's key economists called by the prime minister, another official said.

India, at present, allows 51% FDI in single-brand retail and 100% FDI in wholesale operations. Besides allowing 51% FDI in multi-brand retail, the government may now remove the cap on FDI in single-brand retail.

A committee of secretaries from across ministries had in July cleared the proposal to allow 51% FDI in multi-brand retail. Inter-ministerial consultations are, therefore, expected to be a mere formality now.

The move to open up the $400 billion domestic sector to foreign players comes five years after India allowed single-brand foreign retailers such as Marks & Spencer and Tommy Hilfiger to set up stores in the country.

The government believes this initiative will help reform the farm sector, bring modern technology in the much-needed back-end infrastructure, help farmers get better remuneration for their produce and also help improve supplies.

"The biggest beneficiary of this policy should be the consumer at large as it is expected to ensure development of adequate supply chain infrastructure and provide an efficient distribution channel to MSMEs, both of which will have a positive impact on prices," said Goldie Dhama, associate director with audit firm PwC.

The lack of adequate back-end infrastructure leads to wastage of around 40% of farm produce, causing a loss of about 50,000 crore annually, according to industry estimates.

Source : economictimes.indiatimes.com