Government looks at opening multi-brand retail to FDI

NEW DELHI: The government is looking at allowing foreign direct investment in multi-brand retailing as part of a slew of measures to make India more attractive to overseas investors.

Senior government officials told TOI that the thinking was that a gradual opening up would be a better strategy with global chains first allowed to open stores in metros, with wholesale cash-and-carry being limited to smaller towns and cities , at least for the moment.

The move, being piloted by the Department of Industrial Policy and Promotion, is at the stage of discussion with political clearance yet to be accorded. Once there is consensus within UPA — un likely until assembly elections are over — states will need to be taken on board, a government official said.

The Economic Survey, tabled in Parliament last month, had also suggested gradual opening up of retail with the initial goahead limited to a few cities.

At present, government allows 51% FDI in wholesale cash-and-carry where global players such as Wal-Mart and Carrefour are only allowed to sell to bulk customers such as hotels, canteens and local retailers.

Officials said the move to open multi-brand retailing is part of the plan to “send the right signals to foreign investors” , some of whom have stayed on the sidelines since a string of scandals erupted last year.

The government is hoping to deal with higher current account deficit by relaxing FDI rules in some key sectors. In fact, stepping up FDI was a key issue on the table of financial sector regulators — RBI, Sebi, Insurance Regulatory & Development Authority and the Pension Fund Regulatory & Development Authority — and finance ministry officials last week. The issue was discussed at the first meeting of the sub-committee of the Financial Stability and Development Council.

Sources said by piloting the insurance and pension bills, the government would signal that it was still serious about reforms. There is also a move to amend the Factories Act and raise the FDI ceiling for defence production to 74% from 26%. While the Department of Industrial Policy and Promotion had floated consultation papers for allowing FDI in multi-brand retail and raising the cap for defence production , the government is yet to thrash out a consensus.