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  3. Government retains the decision of allowing 51% FDI in multi-brand retail

Government retains the decision of allowing 51% FDI in multi-brand retail

13 May 2015 Evaluate

The government is pursuing its decision to continue with the pro-market reform measure initiated by the previous government to maintain a reformist image. In its consolidated FDI policy, the government has retained the previous UPA government’s decision of allowing foreign retailers to open multi-brand stores with 51 percent ownership. The congress led UPA in September 2012 had allowed foreign direct investment in multi-brand retail with a 51 percent cap.

Against the fear of change and amid political slugfest over the issue, BJP that had opposed foreign investment in multi-brand retail sector in its election manifesto last year, has not made any changes in the policy. Earlier, last year Commerce and Industry Minister Nirmala Sitharaman had said that FDI will not be allowed in multi-brand retail trade in line with the position the BJP had articulated in its manifesto, however she had added that at the moment there was no move to reverse the notification that the UPA government had issued to open up the multi-brand retail sector, allowing up to 51 per cent FDI.

The policy added that minimum amount to be brought in, as FDI, by the foreign investor, would be $100 million. At least 50% of total FDI brought in the first tranche of $100 million, shall be invested in ‘back-end infrastructure’ within three years. Further, the 51 percent FDI policy leaves it to the states to take their own decisions. “FDI in multi brand retail trading, in all products, will be permitted, subject to the following conditions that Fresh agricultural produce, including fruits, vegetables, flowers, grains, pulses, fresh poultry, fishery and meat products, may be unbranded.

The new 119-page new Compendium mentions all existing FDI policy decisions as also the changes made over the past one year. These include changes in the foreign direct investment cap in defence and insurance sectors, where limits have been hiked to 49 percent from 26 percent earlier.

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