A committee charged with evaluating the opening of India’s retail sector to Foreign Direct Investment (FDI) in multi-brand retail will recommend the government allow foreign firms to take a 51 per cent share in such enterprises.
According to a report by Reuters the endorsement was an important step towards opening the country’s US$450bn retail sector to foreign retail giants such as Walmart and Carrefour.
Currently India allows 51 per cent foreign ownership of single-brand retailers and 100 per cent of wholesale operations, but does not allow ownership in multi-brand retail outlets such as supermarkets and hypermarkets.
According to Reuters, any final decision on the matter would be subject to staunch political opposition from both inside and outside the government coalition.
Currently India’s retail sector is dominated by independent family-owned operations and there is concern FDI would cause huge job losses amongst this sector.
On the other hand, it is argued a huge influx of foreign capital would help the retail sector develop its supply chain and address bottlenecks and recent high food price inflation.
The committee’s recommendations are not binding, however, and any future legislation on the matter will need the approval of the cabinet.
A senior government official told Reuters ministries were still debating whether FDI should be capped at 49 per cent or 51 per cent, but the majority were in favour of a 51 per cent cap.
If FDI in multi-brand retail is opened up it is likely conditions would be laid out to ensure foreign companies invested in back-end infrastructure.
No timeline has yet been given on when a final policy note would be submitted for approval by cabinet, Reuters reported.
