The government is planning to ease foreign direct investment (FDI) norms in multi-brand retail including the condition that global firms will have to source 30% of their merchandise from local firms and artisans -- a clear sign the government was heeding criticism by businesses that restrictive policy environment was hurting India’s image as global investment hotspot.
Last year, the government had thrown open the gates for multi-brand retail hoping that giants such as Walmart, Tesco would set up exclusive deep-discount front-end retail outlets in India.
Currently, India allows 51% FDI in multi-brand retail who can set up stores in cities with a population of minimum one million. Sources said the Cabinet is likely to consider a proposal of the commerce ministry on Thursday to review the FDI policy on multi-brand retail.
The cabinet may also consider allowing global chains to open multi-brand stores in cities with population less than one million. In addition, foreign institutional investors (FIIs) could be allowed to invest in such retail ventures in India.
The government so far has not received a single FDI proposal in multi-brand retail ever since it eased rules in September last year.
Another proposal by the ministry eases the definition of “control” for calculation of total foreign investment so that more money can flow within the existing limit of FDI.
Retail industry representatives have argued for identical norms for single and multi-brand retail.