Retail FDI gets push, finmin to finalise Cabinet note next week

After hobbling on a proposal paper released in July last year by the Department of Industrial Policy and Promotion on permitting FDI in multi-brand retailing in India, the discussion seems to finally be gaining some traction.

The Union Finance Ministry has approved the Cabinet note on Foreign Direct Investment (FDI) in retail - which significantly seeks a 51 percent FDI permit in multi-brand retail, CNN-IBN reports. The note also seeks to increase FDI in single brand retail from the present 51 percent to a 100 per cent.

This echoes a proposal by a committee of secretaries (CoS) in July this year, to allow 51% FDI in multi-brand retail and a hiking of the permissible limit cap in single brand retail.

Speaking to CNBC-TV18, yesterday, Rajiv Kumar, secretary general, FICCI, said that FDI in multi brand retail was a very crucial reform for the Indian economy and it was high time the government should finalise the policy on it.

Multi brand global retailers like Wal-Mart, Carrefour SA and Tesco Plc have long been hoping to to enter the lucrative Indian market, but political opposition - from the Left and the BJP - and widespread fears that multi-brand retailing could hurt small ‘kirana’ stores has delayed a political consensus on the policy.

Kumar had told CNBC that if the FDI note did come through he hoped that the Opposition and others would not be an impediment to it “because it’s a crucial reform for the Indian economy.”

He tried to allay fears of wiping out the present system of local individual retail stores by saying that the industry would see “that the states are given the opportunity to take it (the policy) forward as they would like rather than being given some sort of a uniform package.”

India currently allows 51 percent FDI in single-brand retail and a 100 percent in cash-and-carry stores - who are only permitted to sell to other retailers and businesses.

While a final Cabinet note in this regard is expected by next week, major retail stocks closed up.

Shares of Pantaloon Retail (India) Ltd., part of India’s Future Group, closed 8.13 percent higher at Rs 182.85. Trent Ltd., a part of the Tata conglomerate, closed up 1.70 points at 1,038.15 on the Bombay Stock Exchange.

Watch CNN-IBN report: