Govt okays Amazon's $500 mn investment in food retail; watch out Big Basket, Grofers

The competition in the food retail sector, dominated by companies such as Big Basket and Grofers, is likely to heighten with the government approving Amazon’s proposed $500 million investment in the sector. [caption id=“attachment_3782263” align=“alignleft” width=“380”]  Representational image[/caption] The proposal was pending before the Foreign Investment Promotion Board (FIPB) which has been abolished now. Hence, the Department of Industrial Policy and Promotion (DIPP) gives the green signal to the proposal. As per the proposal, the company will open a wholly-owned subsidiary in India to carry out the business. It will stock food products and sell online. An Amazon spokesperson said: “Yes, we have received the government approval for food retail based on our application for the same”. Currently, the government permits 100 per cent foreign direct investment (FDI) in the food processing sector. As per norms, a foreign company can open a wholly-owned subsidiary in India to retail food products produced and or manufactured in the country by way of opening stores or online. The government had received investment proposals from three companies - Amazon, Grofers and Big Basket - worth $695 million for retail of food products. While US-based retail giant Amazon is one of the major e-commerce players in India, Grofers and Big Basket are into online grocery space. Amazon has proposed to invest around $500 million in retail of food products. The government last year allowed 100 per cent foreign direct investment (FDI) through approval route for trading, including through e-commerce, in respect of food products manufactured and produced in India. In 2016-17 (April-December), the food processing sector in the country received FDI of $663.23 million. The Union Cabinet last month decided to wind up the 25-year-old FIPB, which had been vetting FDI proposals requiring government approval, to expedite the clearance process. Under the new mechanism, proposals related to retail sector is being approved by the commerce and industry ministry.