FDI in multi-brand retail still awaiting cabinet nod

The decision to allow foreign direct investment (FDI)

in the multi-brand retail sector has been put off till the next financial year. The reason: Not keen on opening another political front the government is likely to take a call on the matter only in the next fiscal. According to sources, no clear steps have been taken for it to get the Union cabinet’s nod after the recommendation of the Committee of Secretaries (CoS) on July 22 to allow 51 per cent FDI. The buzz is that the main reason for the delay is the government’s lack of will on the matter and also being under fire for various other reasons, it does not want to open another front. Moreover, safeguards or riders in allowing FDI in multi-brand retail are still in the process of being ironed out. About a couple of months back the Committee of Secretaries (CoS) approved in principle allowing 51 per cent FDI. The policy riders approved by the CoS said investing at least 50 per cent of the FDI in back-end infrastructure should be mandatory, 30 per cent sales turnover would have to come from small traders, and retailers would have to source at least 30 per cent manufactured items in value terms from small and medium enterprises.

International retail majors waiting for the sector to open up for years include the US-based Wal-Mart, the UK’s Tesco, and Carrefour of France. While FDI is not permitted in multi-brand retail, single-brand outlets are allowed up to 51 per cent foreign investment. In cash and carry or wholesale trade, up to 100 per cent FDI is allowed. Meanwhile, with speculation rife on FDI in multibrand retail being put on the backburner for now, retail sector stocks of some companies like Pantaloon Retail (India), Store One Retail and Trent have been trading low at the BSE.