Retail may see more FDI

Commerce and Industries Minister Kamal Nath today said that government is considering opening up retail sector for multi brand speciality formats like consumer electronics...

Commerce and Industries Minister Kamal Nath today said that government is considering opening up retail sector for multi brand speciality formats like consumer electronics, sports goods, building and construction equipment and stationery. The move follows last year’s decision to allow 51 per cent FDI in single brand retail outlets.

“We are looking at expanding the provisions of the earlier relaxation as also facilitating sector specific FDI in retail,” Nath said. The government has received FDI proposals for single brand outlets from companies like Singapore’s Starbucks, Lee Cooper and Argentina’s Rino Jreggio but a decision is yet to be made. Under the single brand route nine proposals have been approved so far while three have been rejected.

“We have to ensure that FDI in sectors within retail must lead to incremental economic activity and does not displace neighbourhood stores. We are working on it and will announce it soon,” Nath said while releasing the second edition of the India Retail report here.

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India Retail report 2007 has estimated that the sector will generate 2.5 million direct jobs through retail operation and over 10 million additional jobs in support activities like contract production and processing. With so much emphasis being laid on organised retailing, the segment is expected to grow from the current Rs 55,000 crore to Rs 200,000 crore ($45 billion) by 2010. The investment scenario in the sector is also upbeat and by 2010 the sector is expected to attract over Rs 20,000 crore worth investments.

Currently, only FDI up to 51 per cent is allowed in single-brand retail with prior government approval. In wholesale cash-and-carry, up to 100 per cent FDI is allowed. The government wants to encourage foreign investment in back-end of retail activity like logistics, cold chain and technology so that it even helps the traditional retailers.

Nath said retail sector is about technology and processes and not real estate. He said the big players have started looking at models that were unthinkable before such as bringing partners in back-end operations.