Knowing about FDI in multi brand retail
By - Dhiraj Singh, Director (M&C), P.I.B
FDI in multi brand retail
The Government has decided to allow Foreign Direct Investment (FDI) upto 51% in multi brand retail. This means that global retailers can come to India with a local partner and set up stores in the country. Till now FDI was not allowed in multi brand retail. However, there were big multi brand retail outlets owned by Indian entities.
This decision is an enabling policy that will open up new windows of opportunity to modernize the retail sector particularly for agricultural products and the small-scale sector.
The benefits would be for all:
The farmer will get a better price for their produce as middlemen will be removed
and retailers will buy directly from farmers. Farmers’ losses from wastages specially
in vegetables and fruits will come down.
and retailers will buy directly from farmers. Farmers’ losses from wastages specially
in vegetables and fruits will come down.
Consumers will get better prices and greater variety from these stores.
The entry of global players will encourage existing traders and retail outlets to
upgrade and become more efficient, thereby providing better services to the
consumers as also better remuneration to the producers from whom they source
their products.
The entry of global players will encourage existing traders and retail outlets to
upgrade and become more efficient, thereby providing better services to the
consumers as also better remuneration to the producers from whom they source
their products.
This is also one of the most effective ways to tackle rise in food prices and
inflation due to availability of food items on lower prices.
inflation due to availability of food items on lower prices.
Today India is one of the largest producers of fruits and vegetables in the world.
However 30-40% of food and vegetable products go waste due to lack of storage
and cold chain facilities. This decision will bring in funds for investment to
improve supply chain infrastructure such as cold storage, transportation
and procurement along with bringing in investment for growth of the economy.
However 30-40% of food and vegetable products go waste due to lack of storage
and cold chain facilities. This decision will bring in funds for investment to
improve supply chain infrastructure such as cold storage, transportation
and procurement along with bringing in investment for growth of the economy.
This will bring huge employment opportunities in agro-processing, sorting,
marketing and the frontend retail business. As per some estimates upto
10 million jobs will be created in coming years.
marketing and the frontend retail business. As per some estimates upto
10 million jobs will be created in coming years.
Government has provided safeguards to protect national interest such as:
· Minimum investment by the global retailer will be $ 100 million and 50% of which
will be in backend infrastructure that will control wastage and help local
farmers. Backend infrastructure will be in or near villages and will be of
immense value for rural economy.
will be in backend infrastructure that will control wastage and help local
farmers. Backend infrastructure will be in or near villages and will be of
immense value for rural economy.
· It has been made mandatory that 30% sourcing will be done from Indian
small industry. This will promote local manufacturing, as Indian small industries
will feel encouraged to expand capacities in manufacturing thereby creating
more employment and also strengthening the manufacturing base of the country.
small industry. This will promote local manufacturing, as Indian small industries
will feel encouraged to expand capacities in manufacturing thereby creating
more employment and also strengthening the manufacturing base of the country.
·These stores can be set up only in cities with the population of more than
10 lakh. This provision along with the requirement of master/zonal plans will
make sure that small retailers are not affected. Moreover small retailers can
benefit from sourcing their products from deep discount wholesale cash-and-carry
big retailers. This will improve quality of their product and reduce their cost.
10 lakh. This provision along with the requirement of master/zonal plans will
make sure that small retailers are not affected. Moreover small retailers can
benefit from sourcing their products from deep discount wholesale cash-and-carry
big retailers. This will improve quality of their product and reduce their cost.
· In order to ensure supply to ration shops (PDS) government will have the
first right to the procurement of agricultural products. This is important from
food security point of view also.
first right to the procurement of agricultural products. This is important from
food security point of view also.
Some people fear that big retailers will destroy small traders by keeping
low prices initially (predatory pricing). However, Competition Commission
of India will not allow this to happen. As the policy will be implemented in
only 53 cities (with population over 10 lakh) which will make it difficult for
big retailers to crush competition. In many developing countries like China,
Thailand, Indonesia, Brazil, Argentina, and Singapore, where
100% FDI is allowed, small retailers are successfully co-existing
with big retailers.
low prices initially (predatory pricing). However, Competition Commission
of India will not allow this to happen. As the policy will be implemented in
only 53 cities (with population over 10 lakh) which will make it difficult for
big retailers to crush competition. In many developing countries like China,
Thailand, Indonesia, Brazil, Argentina, and Singapore, where
100% FDI is allowed, small retailers are successfully co-existing
with big retailers.
Indian labour will continue to be protected by Indian labour law.
It is an enabling policy framework. States are free to adopt it or leave it.
Those states that do not want to have FDI in retail are free not to allow
them. This is done to maintain the freedom of states in federal structure.
FDI policy does not override the existing laws governing, trade and commerce
in the country. The State Government laws and regulations in this regard
would apply as much to the foreign players as to the establishment of any
domestic businesses in the retail sector
It is an enabling policy framework. States are free to adopt it or leave it.
Those states that do not want to have FDI in retail are free not to allow
them. This is done to maintain the freedom of states in federal structure.
FDI policy does not override the existing laws governing, trade and commerce
in the country. The State Government laws and regulations in this regard
would apply as much to the foreign players as to the establishment of any
domestic businesses in the retail sector
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