CoS apporves 51% FDI in mulit-brand retail

Finally the news Indian and MNC retailers and consumers

alike were waiting for has happened. Last Friday, the Committee of Secretaries (CoS) have recommended opening up foreign direct investment (FDI) up to 51 per cent in the multi-brand retail sector. This will open up doors for retail giants like Wal-Mart, Carrefour and Metro AG who've been eyeing the Indian retail market which is valued at $600 billion. The committee, headed by Cabinet Secretary A K Seth, recommended that the global retailers should ensure that at least half the amount invested by them goes in the back-end supply chain. However, there are a few caveats as the panel has proposed a minimum investment of $100 million. The CoS also recommended that FDI should be allowed only for 36 large cities which have population of over 1 million. The secretaries’ decision still needs to go to the Cabinet Committee on Economic Affairs for the next step to be taken. Then the Union cabinet will take a final decision on the recommendations. At present, India only allows 100 per cent FDI in cash & carry wholesale trade — that is, business-to-business (no individual buyers) and 51 per cent in single-brand retail. No FDI is allowed in multi-brand retail.

Of course, there have been a lot of positive reactions from the industry on the move. Thomas Varghese, CEO, Aditya Birla Retail, feels the move is a positive change and is “welcomed by the industry.” Kumar Rajagopalan, CEO of Retailers Association of India, an apex body representing the industry, called it another step in the right direction. Arvind Singhal, MD, Technopak Advisors, a consultant to retailers, was circumspect for he feels the secretaries’ clearance is still a recommendation and the cabinet is not obliged to accept it. So the next steps will be keenly watched.