Reasons for Allowing FDI in Retail Sector

Press Information Bureau

Government of India

Ministry of Commerce & Industry

12-December-2012 19:06 IST

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 Government approval.

As per some news items published on 17.11.2012, Wal-Mart, USA, is stated to be inquiring into allegations of potential violations, under the Foreign Corrupt Practices Act of USA, in certain countries where the company is operating.

India has stringent anti-corruption laws. Any corrupt practices are liable to be dealt appropriately under applicable laws.

This information was given by the Minister of State for Commerce & Industry Dr. S. Jagathrakshakan in written reply to a question in Rajya Sabha today.

******

DS/RK