Retailigence

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Govt keen on 49 pc FDI in multi-brand retail

Posted by retailigence on October 22, 2008

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

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