Retail FDI may come with stiff conditions

Foreign direct investment in the multi-brand retail may be allowed subject to a stiff condition that global retailers will have to invest heavily in the back-end infrastructure like warehousing and cold storage.

The Department of Industrial Policy and Promotion will soon come up with concept papers on relaxing norms for FDI in different sectors including multi-brand retail.

The paper on FDI in retail may include a provision that global retailers interested in opening multi-brand stores in the country will have to put in a significant part of their investment in the back-end infrastructure, a source in the know of the development said.

"We will put this in the discussion paper," the DIPP said, adding the discussion papers seeking comments from stakeholders are expected to be put in the public domain soon.

At present, FDI is not allowed in the multi-brand retail sector, which is dominated by the neighbourhood kirana stores and is a politically-sensitive topic. However, foreign players are permitted in wholesale trade as also single-brand, high-end retail.

Expressing concern over high food prices, Prime Minister Manmohan Singh had recently suggested changes in the retail FDI policy so as to narrow the gap between the consumer and farm gate prices. "We need greater competition and therefore need to take a firm view on opening up of the retail trade," the prime minister had said recently.

Since FDI is not permitted in retail, world's number one retailer WalMart has settled for cash-n-carry (wholesale) joint venture with the Bharti Group.

Under 5 per cent of the country's retail is in the organised space today, and a few homegrown players like Future Group, Reliance Retail, Spencer's dominate the scene.

Besides, the government would also float draft proposals for liberalising FDI in defence and agriculture.