Cabinet approves 51 per cent FDI in multi-brand retail

New Delhi: The Cabinet finally paved way for the entry of global retail majors like Wal-Mart, Tesco and Carrefour to open independent multi-brand retail outlets in India. The Cabinet has permitted foreign direct investment (FDI) of up to 51 per cent in multi-brand retail. Simultaneously, the Cabinet also gave the nod for raising the FDI limit in single-brand retail ventures to 100 per cent. The policy will allow multi-brand foreign retailers to open outlets only in cities which have a population of more than 1,000,000 as per the 2011 Census. At present, there are 55 such cities which would help big retail chains to move beyond the metros to smaller cities. The clearance comes with several conditions attached to it. Foreign investors will be required to invest up 50 per cent of total FDI in back-end infrastructure. Such infrastructure will include capital expenditure on all activities, excluding that on front-end units. Expenditure on land cost and rentals will not be counted for purpose of back-end infrastructure. Moreover, retailers will need to source at least 30 per cent of manufactured/processed products from small industries. However, there will not be any obligation on the part of retailers to source agricultural produce such as fruits and vegetables. The Government of India has also retained the first right on sourcing agricultural produce. It makes 30 per cent sourcing from small and medium enterprises mandatory, as soon as the FDI limit exceeds 51 per cent. Opening up of FDI in multi-brand retail trade and further liberalisation of single-brand retail trade, as per the Government, will facilitate greater FDI inflows besides additional and quality employment.