Specialty retail may get 51% FDI in India

The government may allow 51% foreign direct investment in specialty retail ventures with certain riders. At present, 51% foreign investment is permitted in single-brand retailing and 100% in cash-and-carry wholesale retailing.Commerce and industry ministry sources say, foreign firms setting up specialty retail outlets will not have a free run. The government is likely to restrict the number of shops such companies can set up. Further, the government may allow such companies to operate only certain retail formats and introduce restrictions on locations. When contacted, some officials said, the format and the locations of such retail shops should not clash with the interest of domestic small retail companies.The move by the department of industrial policy and promotion (DIPP) comes at a time when the government is under pressure from various political parties, including the Congress and the Left, to open up retail to foreign investment. The areas identified under specialty retail where FDI will be allowed include sports goods, consumer electronics, building equipment and stationery.The DIPP feels that opening up specialty retail does not pose any threat to Indian retailers. It has argued that international brands like McDonald’s, Pizza Hut and KFC have not crowded out local players like Bikanerwala and Haldiram.In a recent note, it says FDI in specialty retail trade will not trigger a large-scale exit of small family-owned outlets. It points out the threat, if any, to small retailers from an international chain, was the same as that from a domestic retailer. The DIPP note argues consumers will be the ultimate beneficiaries of allowing FDI in retail trade, as it will lead to lower prices and better quality of products and services. courtesy:economictimes
For more on Retail India visit www.retailindia.tv