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Government notifies FDI in multi-brand retail

The Government has formally notified the cabinet/CCEA decisions on FDI in single brand retail, multi brand retail, civil aviation, broadcasting sector and power exchanges. The decisions were taken on September 14, 2012. The decision to allow FDI in multi-brand retail will be a huge boost for foreign players like Wal-Mart, Carrefour S.A, Tesco and Metro AG to expand their Indian operations. While Wal-Mart has a 50:50 cash and carry joint venture with Bharti Group, Carrefour runs wholesale stores. Tesco has tie-up with the Tata group.

With this notification, foreign investors can invest up to 51% in multi-brand retail in the country.

The government also notified its decision to permit foreign airlines to invest in capital of Indian companies up to the limit of 49%.

Major caveats in Multi-brand retail

  1. The minimum amount to be brought in as FDI by the foreign investor should be $100 million
  2. At least 50 percent of the total FDI should be invested in back end infrastructure within three years of the first tranche of FDI. The backend infrastructure includes investment made for processing, manufacturing, distribution, design improvement, quality control, packaging, logistics, storage, ware-house, expenditure on land cost, rentals etc.
  3. Retail outlets should be set up in cities with a population of over 10 lakh
  4. At least 30 per cent of the manufactured products should be from small industries with a total investment in plant and machinery not exceeding $1 million
  5. Retail trading, in any form, by means of e-commerce will not be permissible
  6. Government will have the first right to procure agricultural products
  7. Applications will be processed in the Department of Industrial Policy & Promotion to determine if the proposed FDI meets the notified guidelines and will be sent to the Foreign Investment Promotion Board, for the approval of the government.

States which have so far agreed upon FDI

Ten states and union territories have so far agreed to implement the FDI decision. The states include: Andhra Pradesh, Assam, Delhi, Haryana, Jammu & Kashmir, Maharashtra, Manipur, Rajasthan, Uttarakhand, Daman & Diu and Dada and Nagar Haveli

Tweaks made in single brand retail

  1. 30 per cent of the value of goods purchased will be done from India
  2. The good purchased above should be preferably from MSMEs, village and cottage industries, artisans and craftsmen, in all sectors, only where it was feasible

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