Government may allow 51 per cent FDI in retail

The government of India may ease foreign direct investment (FDI) rules for the retail sector.

Ministry of commerce & industry is considering to allow up to 51 per cent FDI in multi-brand retail other than primary goods (foods, groceries and vegetables), but with some stiff clauses.

As per the current rules, FDI is not allowed in retail, except for trade of ‘single brand’ products, where up to 51 per cent foreign investment is permitted. Recently, the ministry allowed 100 per cent FDI in wholesale cash-and-carry trade.

The core of the plan is to allow FDI in retail, provided the retail stores are located in cities with a minimum population of one million. The move aims to protect vendors in small cities. The new plan may also suggest minimum capitalisation norms for companies investing in retail, in addition to a minimum built-up area rule for their retail outlets. It has also proposed enabling policies to encourage those investing in retail to procure from local manufacturers.

The proposal being worked out suggests that 50 per cent of FDI in food retail should be spent towards building infrastructure, logistics or agro processing.

The government could also ask retailers to reserve 50 per cent of jobs in their outlets for rural youth.