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Foreign Retailers may get access to major cities

Foreign Retailers may get access to major cities

China allowed Foreign Direct Investment  in multi-brand retail in 1992, but only in six major regions and cities, and limited foreign ownership to 49 per cent. India seems to ready to follow a similar approach now, but allow 51 per cent FDI for companies such as Walmart and Tesco. (Single brand retail stores such as those for Levi and Reebok are already permitted and FDI up to 100 per cent is allowed in “wholesale cash-and-carry” stores which are not supposed to permits access to consumers).

According to the Business Standard newspaper, the six chosen cities will be Delhi, Mumbai, Kolkata, Chennai, Bangalore and Hyderabad. “The decision in favor of a ‘calibrated’ liberalisation, keeping other cities out, is on account of political concerns regarding the impact of the opening up of multi-brand retailing to FDI on small retailers.”

Additional conditions may also be imposed:

  • While FDI up to 51 per cent is proposed, state governments may get the power to decide if they want to allow foreign retailers to open front-end stores in their cities.
  • The policy also says at least 50 per cent investment should be in back-end infrastructure.
  • 30 per cent manufactured products should be sourced from domestic small and medium enterprises.

What this means:

The Congress-led coalition government is edging slowly toward letting foreign retailers participate in the India market but the list of conditions is  going to create plenty of employment for state and federal bureaucrats, as well as for attorneys and advisors. I hope some of these regulations are released well in advance of the next elections so that they have time to play out prior to any possible change of government.

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