In order to attract more funds and generate more jobs, the government is considering the option of permitting foreign supermarket players to open retail stores but only for sale of ‘Made in India’ products, as it looks to relax the norms for multi-brand retail.
The FDI policy also imposes several conditions for foreign players like mandatory sourcing of goods from MSMEs and a certain percentage of investment in the back end infrastructure. These conditions have acted as constraints for foreign retailers. However, if they are allowed to retail ‘Made in India’ goods in the country, these mandatory rules may not be imposed on them.
In addition, with a view to attracting more global players, a proposal to allow 100 percent FDI through automatic route in single brand retail is also under consideration. Foreign investments are considered crucial for India, which needs around $1 trillion to overhaul its infrastructure such as ports, airports and highways to boost growth. Foreign investments will help improve the country’s balance of payments situation and strengthen the value of the rupee against global currencies, especially the US dollar. FDI inflows into India firmed up by 22 percent to $35.85 billion during April-December 2016.
Opening the retail sector, the government last year permitted 100 per cent FDI in domestic trading of food products. Although, the current foreign direct investment (FDI) policy permits overseas players to hold 51 percent stake in an Indian retail company. So far, only one foreign player, Tesco, has received approval for opening stores under the multi-brand retail policy.