Govt seeks to move fast on easing FDI policy for multi-brand retail

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With elections in five key states over, the government will be looking to move fast on further easing Foreign Direct Investment (FDI) norms in the country which may also include the contentious multi brand retail segment. Inter-ministerial discussions are ongoing, a Department of Industrial Policy and Promotion (DIPP) official said under conditions of anonymity.

A media report on Tuesday, suggested that the government was looking at the option of a limited opening up of the sector. This would be done by, it said, allowing food retailers to generate around 20-25 per cent of their sales from non-food items such as kitchen-use products or basic household requirements like toothpaste.

Currently, FDI in multi brand retail trading, in all products, is permitted subject to a range of stipulations, which companies have termed difficult. A total 100 per cent FDI is allowed in stores that sell only Made-in-India food products or locally produced farm goods.

Other conditions include, a minimum of $100 million to be brought in as FDI, of which, at least 50 per cent needs to be invested in 'back-end infrastructure' within three years.

Also, the government reserves the first right to procurement of agricultural products. Of these, fresh agricultural produce, including fruits, vegetables, flowers, grains, pulses, fresh poultry, fishery and meat products, may be unbranded.

There have been no takers for the food retail business so far as several retailers are waiting for a further opening up.

With the budget dismantling the Foreign Investment Promotion Board (FIPB), the entire policy architecture governing foreign investment also needs to be reviewed.

The rationale behind the move is that most foreign direct investment (FDI) is now on the automatic approval trajectory. Only an estimated six or seven per cent of all sectors are under the approval route.

 Commerce and industry minister Nirmala Sitharaman had hinted that in the absence of  FIPB, departmental regulators might suffice to decide. On the other hand, DIPP secretary Ramesh Abhishek believes administrative departments could also be considered for taking the final call.

With growth in FDI in important sectors, overall foreign inflow rose by 30 per cent to $21.6 billion during the first half of 2016-17. FDI in the country grew by 29 per cent to $40 billion in 2015-16 from the previous financial year.

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