Despite political resistance from alliance and opposition, the Union Cabinet – at a two-hour meeting chaired by Prime Minister Manmohan Singh – on Thursday allowed 51% foreign direct investment (FDI) in multi-brand retail as well as 100% FDI in single brand retail.
The FDI clearance in Multi Brand retail comes with several caveats, mentioned below, to address fears of small traders that giant global chains will drive them out of business and throw millions out of jobs. Foreign chains like Walmart already have a presence in India in the cash and carry (wholesale) sector.
1) Minimum $ 100 Mn investment per project
2) 50% of the investment to be utilised for back end infrastructure e.g. warehousing , cold storage etc.
3) Only in urban cities having population of over 10 lacs as per 2011 census (only 53 cities meet this criteria )
4) State Governments have been given authority to grant permission for the operations
5) At least 30% of the goods to be procured from Small and Medium Enterprises
“This is a bold and significant move. It will redefine India’s supply chain infrastructure and bring down prices,” – Raj Jain, Walmart India managing director and CEO.
“It is a win-win situation for everyone. With the amount of money to be invested in back-end, supply chain and farm sector will benefit”, – Future Group Chief Executive Officer Kishore Biyani.
Sharing similar view, industry body CII said it strongly supports the introduction of FDI in multi-brand retail as it would benefit consumers, producers (farmers), small and medium enterprises and generate significant employment.
“This would open up enormous opportunities in India for expansion of organised retail and allow substantial investment in the back-end infrastructure like cold chains, warehousing, logistics and expansion of contract farming,” CII President B Muthuraman said in a statement.
Previously, no FDI was allowed in multi-brand retail while in the single-brand retail only 51% was allowed. In the wholesale cash and carry, 100% FDI is allowed.
