Cabinet clears 51% FDI in multi-brand retail

Pushing a major reform, the government on Thursday allowed 51 per cent foreign investment in the multi-brand retail, paving way for global chains like WalMart, Carrefour and Tesco to open mega stores in 53 major cities.  The decision, a game-changer for the estimated USD 590 billion (Rs 29.50 lakh crore) retail market, is taken at the meeting of the Cabinet presided over by Prime Minister Manmohan Singh. The Cabinet also decided to remove the 51 per cent cap on FDI in single brand format under which companies in food, lifestyle and sports business run stores. Owners of brands like Adidas, Gucci, Hermes, LVMH and Costa Coffee can have full ownership of business in India. In the wake of apprehensions among some political parties, including UPA ally Trinamool Congress over impact of the decision on farmers and kirana shops, tough riders have been imposed on the entry of multi-national companies. They should bring in minimum investment of USD 100 million, of which half should be in the back-end infrastructure like cold chains, processing and packaging.
The retailers will have to source at least 30 per cent of manufactured and processed products from small-scale units. Battling near double digit inflation, government has been trying to build a consensus on the issue for the last 17 months, contending the entry of MNCs in retail would contain inflation. Considering space constraint in big cities, stores can come up within 10 km of 53 cities with one million populations. Besides, agri produce like fruits, vegetables, grains, pulses, poultry, fishery and meat products will have to be sold without branding. Also, government and its agencies will have the first right on procurement. as much as 95 per cent India's retail market is driven by mom and pop (kirana) stores. The organised trade with players like Future group, Reliance and the Tatas have captured only a small cake in the big retail market. Commerce and Industry Minister Anand Sharma is likely to make a statement on Friday in the Parliament.