The Indian Centre is reported to be looking at plans to promote foreign direct investment (FDI) in multi-brand retail.
Perceived changes at the finance ministry following the presidential polls that are to be held later this month would signal that a change in policy over FDI is indeed likely, sending out a strong and positive signal to global investors.
“There is a lot of activity towards this end (opening FDI to retail)… perhaps after the presidential polls, the government could come out with a formal notification of the cabinet decision taken last year,” a senior commerce ministry official said.
The formal notification will pave the way for global players such as Tesco, Ikea, Walmart and Carrefour to enter a sector dominated by small stores.
Commerce minister, Anand Sharma who has been pushing the case for 51 per cent FDI in multi-brand retail said, “We recognise those states who are in favour of FDI. It is their right, they are democratically elected governments of the provinces. Similarly, there are states who have reservations. Under the Constitution, we have to respect their wishes too,” Sharma said.
The minister’s efforts have helped the government to get the support of the chief ministers of Odisha, Punjab, Uttar Pradesh, Delhi, Maharashtra, Haryana, Andhra Pradesh and Assam.
However, the move is being met with strong opposition from several states, including Bengal, Bihar and Kerala.
Officials said the Centre would be only a facilitator in opening up the sector. States have a larger role to play as they will have to grant permission to the retailers under local laws, such as Shops and Establishments Act and Agricultural Produce Marketing Committee Act.
In an earlier move to appease foreign investors and help pave the way for FDI in multi-brand retail the Indian government passed legislation in January allowing 100 per cent FDI in single-brand retail. Previous regulations capped foreign ownership at 51 per cent.
Business Standard reports that Swedish home furnishings giant Ikea has approached the Indian government with a proposal to establish 25 stores in the country at a cost of US$1.9bn which would be the largest single investment in the sector to date. In an application to the government Ikea stated the first stage of development would involve investing US$758m to open 10 stores. The second stage would involve investing US$900m in opening 15 additional stores.
According to the report however, the home furnishing giant has requested policy changes the government may find difficult to accept.