NDA-govt finally opens country’s doors to foreign retailers

Despite its strong opposition to foreign direct investment (FDI) in multi-brand retail, which was also a part of its election manifesto, the NDA government has finally opened its doors to mega retailers like Walmart and Carrefour. These global giants can now invest in India’s multi-brand retail through the foreign portfolio investment (FPI) route. The government has decided to allow FPI up to 49 percent or up to the sectoral cap (whichever is lower) through the automatic route.

The clarification was made in a press note released by the Department of Industrial Policy & Promotion (DIPP), based on the foreign investment composite caps approved by the Union Cabinet earlier this month. Foreign portfolio investment includes foreign institutional investments (FII), sub-accounts and qualified foreign investments (QFIs). However, foreign retailers will not be able to have direct management control of the Indian joint-venture since FPI does not provide investors with the option of management participation.

Foreign investors do not need to approach the government to invest in the multi-brand retail sector through the foreign portfolio investment route. Experts argue since the policy continues to allow foreign direct investment up to 51 percent through the automatic route, the government may further consider increasing the investment cap in multi-brand in future.