In a concrete sign that the government is moving towards allowing global giants such as Walmart, Tesco and Carrefour to set up deep discount stores in India, a committee of secretaries (CoS) will meet on Friday to discuss a formal proposal to allow up to 51% foreign direct investment (FDI) in multi-brand retail, but with a few conditions.
The Department of Industrial Policy and Promotion (DIPP), which is piloting the policy, has drafted a proposal to permit FDI in multi-brand retail with the condition that at least 50% of the total FDI should be in back-end infrastructure such as cold-chain and warehousing.
The Cabinet Committee on Economic Affairs (CCEA) will take up the matter after the CoS, headed by Cabinet Secretary Ajit Seth approves the proposal.
According to the proposed policy, retailers will have to file a statement of accounts with the Reserve Bank of India (RBI) and the Foreign Investment Promotion Board (FIPB) disclosing clearly that investment in back-end infrastructure has not been less than 50%.
Also, the minimum FDI in any multi-brand retail project should be $100 million (R450 crore).
Large deep discount stores will be allowed to be set up only in cities with a population of more than 10 lakh and only in those states that allow FDI in multi-brand retail. At least one-third of these stores' sales should be made to small retailers, and they should source a minimum of 30% of manufactured items from small and medium enterprises.
The condition is aimed at neutrailising criticism that organised retail will eat into the businesses of small traders.
The government currently allows 51% FDI in single-brand retail and 100% in wholesale cash-and-carry trade.