Foreign investment norms for retail to stay: Kamal Nath

NEW DELHI: The government has rationalised the foreign investment norms as there is a tightening in the global markets, but the cap on such investments in single-brand retail would continue, Commerce Minister Kamal Nath said here Thursday.

“The government has rationalised calculation of FDI (foreign direct investment). Because of this, there will be further inflow of investment in India,” Kamal Nath told reporters on the sidelines of the India Carpet Expo.

The minister, who inaugurated the four-day exhibition here at Pragati Maidan, however stated that the 49 percent cap on foreign investment in single-brand retail would continue and that there would be no change in sectoral limits. “That position will not change and will remain.”

Foreign investment in multi-brand retail is not allowed in India. “I believe the government will do whatever is possible to prop the economy,” he said, while insisting it would ensure the new foreign investment norms are not misused.

Referring to the slowdown in the US and Europe, Kamal Nath asserted: “But we will be able to maintain a GDP growth at 7 percent.” The carpet expo, organised by the Carpet Export Promotion Council (CEPC), was also attended by Minister for Textiles Shankersinh Vaghela, Commerce Secretary G.K. Pillai and Textile Secretary Rita Menon.

Buyers from the US, Britain, Germany, France and Australia are expected to visit the expo, said CEPC chairman Ashok Jain.

Sources :- The Economic Times

FDI in Multi-brand Retail in the offing

The global financial mess may have a silver lining for the Foreign Direct Investment in Multi-brand Retail with the government hinting the FDI may soon be allowed though the majority may have to be with the Indian promoters. The global economic turmoil may have achieved what the bureaucrats have not been able to achieve for retail sector in India which has not yet allowed any FDI in multi-brand retail due to strong political opposition, particularly from the Left. who feel  it could ruin livelihood of small traders and people employed with traditional form of retail business.

With fears of more outflow of foreign funds, the government has begun to seriously think in terms of revisiting its policy on FDI in the retail sector, says a report by Indiaretailbiz.com. If allowed, this will encourage inflow of new capital as foreign retail majors are very keen to enter India’s retail sector.

The possibility of wine retail in the regions where it is legally allowed through super markets cannot be ruled out too, thus making availability easier. At the present time, infusion of 100 per cent FDI is allowed only  in ‘cash and carry’ (B2B) retail, with only 51 per cent FD allowed in single brand retail. No FDI is, however, permitted in case of multi-brand retail.

While, companies like Metro AG (Germany) and Shoprite (South Africa) have already taken advantage of 100 per cent FDI in ‘cash and carry’ business and Carrefour (France) and Tesco (UK) have announced their intention to do so, single brand retailers like Marks & Spencer (UK) and Vision Express (Netherlands) have been forced to accept partnerships with local business houses for entry into single brand retail. Given the choice, many of them would have liked to go on their own.

Multi brand retail giants like Wal-Mart, Carrefour, and Tesco, on the other hand, due to current FDI policy, have been compelled to either take franchise route or provide technical (back-end) services. Some have even chosen to wait until the policy is completely changed to meet their requirements.

Although, no major policy decisions are expected as the general elections are due in the next six months, the government is believed to be considering relaxation in FDI norms for both single and multi-brand retail.

Kamal Nath, the union minister of commerce and industries, at a recent trade conference in Paris, had announced that the government is seriously considering permitting up to 100 per cent FDI (as against 51 per cent at present) in single brand retail, specifically in the area of luxury retail. The official line so far has been to consider allowing 100 per cent FDI in single brand retail in the segments that do not adversely affect local employment.

It is also believed that, despite pronouncements to the contrary, the commerce ministry has mooted a proposal that seeks to allow up to 49 per cent (as against Zero per cent at present) FDI in multi-brand retail.

Source:-indianwineacademy

Govt keen on 49 pc FDI in multi-brand retail

The Government seems to be aggressively pushing reforms that will help India attract foreign capital — be it portfolio flows or direct investment. Even though only six months remain for the general elections to kick in, Industry and Commerce Minister Kamal Nath is keen to allow FDI in the politically sensitive retail sector.

Although Kamal Nath has repeatedly denied any plans to allow foreign companies to foray into multi-brand retail, government officials said a proposal to allow 49 per cent FDI in multi-brand retail has been circulated to other ministries. Further, his ministry has also recommended eliminating the 49 per cent cap on single-brand retail. It has also sought to hike the FDI limit in infrastructure related to broadcasting to 74 per cent from 49 to encourage direct-to-home business.

Kamal Nath’s efforts to liberalise the foreign direct investment (FDI) regime, especially in the retail sector, could not fructify since the Left parties consistently opposed it, stating it would kill the neighbourhood kirana stores. A study by independent think-tank Icrier earlier this year said while small stores will be affected immediately, there would be no long-term impact on the unorganised retail industry.

It is not just FDI that India will benefit from. Along with foreign investment, the global giants will bring technology for making the back-end of retailing more efficient. “In fact, it will improve the working condition of the youth employed in this sector,” said an official. The proposal seeks the Cabinet’s approval to allow FDI in multi-branded retail in electronic items and sports goods. International retail chains have long been waiting to enter the Indian market given its size. While foreign retailers will find a huge market in the country’s middle class, in the long-term they are expected to make India a sourcing base for their global operations. It will lead to major growth in Indian exports, particularly from the small and medium sectors.

The proposal

• A proposal to allow 49 per cent FDI in multi-brand retail has been circulated to ministries.

• The Commerce ministry has recommended eliminating the 49 per cent cap on single-brand retail.

• The FDI limit in infrastructure related to broadcasting has been sought to be hiked to 74 per cent.

• An Icrier study has said there would be no long-term impact of FDI in retail on the unorganised retail industry.

Sources:- Indian express

Govt rules out FDI in general retail

The DIPP has proposed FDI of up to 51 per cent in multi-brand retail.

Even as the government is thinking of allowing foreign direct investment (FDI) in speciality retail formats selling products of many brands, it has emphasised that there is no plan to open up the general retail sector, including fast moving consumer goods, vegetables and groceries, to foreign equity participation.

Sources said the Department of Industrial Policy and Promotion (DIPP) — the nodal department on matters related to FDI — has clarified to the Cabinet Committee on Economic Affairs (CCEA) that in order to protect the interests of small retailers and neighbourhood stores, the general retail sector will not be opened up.

This comes in the backdrop of a series of proposals on opening up the retail sector that the industry department has put before the CCEA. Currently, FDI in multi-brand retail is not permitted, while 51 per cent foreign equity participation is allowed in single-brand retail.

FDI in multi-brand retail is a politically sensitive issue as there is a perception among small retailers that hypermarkets and malls are already adversely impacting their sales. United Progressive Alliance Chairman Sonia Gandhi had written to Prime Minister Manmohan Singh in early 2007 saying FDI in retail should be allowed only after studying the impact on the livelihood of those involved in unorganised retail.

Subsequently, the DIPP ordered two studies — by the Indian Council for Research in International Economic Relations and the National Council for Applied Economic Research — to assess the impact on unorganised retail and the economy, respectively.

Meanwhile, the DIPP has proposed FDI of up to 51 per cent in multi-brand retail of watches, electronic items, computers and sports goods. The industry department is also proposing to allow 100 per cent foreign equity participation in single-brand retail, subject to conditions (see chart).

Sources added that while preparing the note, the industry department consulted small traders, who expressed concern over allowing FDI in general retail but had no objection to such a move in the case of luxury items and goods.

The DIPP believes that the share of sports goods and electronic items in the Indian retail sector is only 2.7 per cent, while that of jewellery and watches is 5.9 per cent.

According to the Icrier study, the Indian retail sector is expected to grow to $590 billion (Rs 27,376 crore) in 2011-12, by rising 83.22 per cent from $322 billion (Rs 14,940 crore) in 2006-07. Within this period, organised retail is likely to grow 45-50 per cent per annum and quadruple its share in the overall retail trade to 16 per cent by 2011-12.

Source: Business Standard