The government is considering allowing foreign direct investment up to 51 per cent for retail in consumer electricals, electronics and sports goods as well as accessories.
The move is a step forward from allowing 51 per cent FDI in single brand products, and comes even as Congress president Sonia Gandhi expressed reservation about the impact of FDI in retail on small retail stores, with the entry of global majors such as Wal-mart.
“You may consider having the relevant issues properly examined before further decisions are taken”, she said in a letter to the Prime Minister Manmohan Singh last month.
Wal-Mart chief executive officer (CEO) Michael T Duke is expected to visit India next week. The US retail major has entered into an agreement with Sunil Mittal-promoted Bharti group for a retail venture in India.
Friday’s proposal to permit retail of consumer electricals and electronics will cover a wide range of products of every day use, especially durable items used in entertainment, communications and home automation. As per government estimates, consumer electronic retail grew to Rs 41,500 crore in 2006 from Rs 32,000 crore in the previous year.
Consumer electronics retail requires significant investment in terms of large floor-space apart from building up supply chain logistics. India is emerging as a manufacturing base for many electronic goods, their sub-assemblies and components. It is expected that well-established retail outlets would begin to source a large quantum of their requirements from the domestic producers. This would give a fillip to the electronic goods and appliances industry --- which is significantly skill-based and labour intensive, says the Cabinet note prepared on the issue.
Sports goods and accessories similarly cover a broad spectrum ranging from sports bags, clothing to goggles, footwear and headgear, among others. The demand for sports goods is expected to grow substantially from $ 28 million in 2005-06, in view of the Commonwealth Games in 2010. Moreover, India is making a pitch for the Asian Games in 2014.
International manufacturers have already started using India as a competitive sourcing hub for sports goods for the global market.
The policy is expected to encourage sourcing from India and provide market access to domestic suppliers , resulting is expansion of exports.
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