Reasons for Allowing FDIin retail sector ...goverment view

Reasons for Allowing
FDI in Retail Sector

Foreign Direct
Investment (FDI)
complements and
supplements domestic
investment. Domestic
companies are
benefited through
FDI, by way of
enhanced access to
supplementary capital
and state-of-the-art
technologies;
exposure to global
managerial practices
and opportunities of
integration into global
markets.
Government had
instituted a study, on
the subject of “Impact
of Organized Retailing
on the Unorganized
Sector”, through the
Indian Council for
Research on
International
Economic Relations
(ICRIER), which was
submitted to
Government in 2008.
The ICRIER study
indicated significant
benefits for various
stakeholders, such as
consumers, farmers
and manufacturers,
arising from the
growth of organized
retail. Based upon the
study, as well as the
experience of other
countries, it is the
Government’s
assessment that
implementation of the
policy permitting FDI,
up to 51%, in multi-
brand retail trading, is
likely to facilitate
greater FDI inflows
into front and back-
end infrastructure;
technologies and
efficiencies to unlock
the potential of the
agricultural value
chain; additional and
quality employment;
and global best
practices. This, in
turn, is expected to
benefit consumers
and farmers in the
long run, in terms of
quality and price. The
30% mandatory
sourcing condition
has been incorporated
to encourage local
value addition and
manufacturing. The
increased level of
activity, in the front-
end, as well as in the
back-end, resulting
from greater FDI
inflows, is expected to
create additional
employment
opportunities for
rural and urban
youth. It is, further,
expected to
encourage existing
traders and retail
outlets to upgrade
and become more
efficient, thereby
providing better
services to consumers
and better
remuneration to the
producers from whom
they source their
products.
There is no procedure
to shortlist
companies. Foreign
investors desirous of
investing in retail
trade (multi brand or
single brand) in India
are required to
submit their
applications in the
Department of
Industrial Policy &
Promotion, where
their applications are
examined to
determine whether
the proposed
investment satisfies
the notified
guidelines, before
being considered by
the Foreign
Investment Promotion
Board, in the Ministry
of Finance, for Goverment approval.