Re­tail FDI may Cruise Ahead, but with Rider Govt mulls pro­posal to free up re­tail FDI pol­icy but only for In­dia-made goods

The Economic Times - - Front Page - Ruchika.Chi­tra­van­shi @times­

New Delhi: The gov­ern­ment is con­sid­er­ing a pro­posal to free up for­eign di­rect in­vest­ment (FDI) pol­icy on re­tail but only for do­mes­ti­cally man­u­fac­tured goods.

The pol­icy un­der con­sid­er­a­tion ap­plies to both off­line and on­line re­tail and would re­move re­stric­tions on com­pa­nies such as Wal­mart, Tesco, Ama­zon and oth­ers when it comes to the sale of things pro­duced in the coun­try. Apart from at­tract­ing in­vest­ment in re­tail, such a pol­icy would also give a big boost to the Make in In­dia pro­gramme, a se­nior of­fi­cial told ET.

“It has been pro­posed that FDI re­stric­tions in re­tail be lifted to the ex­tent of goods man­u­fac­tured in In­dia,” he said. “The mat­ter will be de­lib­er­ated by the gov­ern­ment in the near fu­ture.”

The gov­ern­ment is ex­pected to take a de­ci­sion after the Ut­tar Pradesh assem­bly elec­tions.

Over­seas-owned on­line re­tail­ers can only func­tion as mar­ket­places, or plat­forms for buy­ers and ven­dors, and aren’t to sell goods on their own ac­count through an in­ven­tory model. Multi-brand re­tail­ers such as Wal­mart can only own up to 51% of In­dian ven­tures and are sub­ject to other con­straints as well.

The cur­rent pol­icy al­lows domes-

tic man­u­fac­tur­ers to sell just their own goods through any chan­nel — on­line or off­line. Only in the case of food prod­ucts can lo­cally pro­cessed items be sold by any­one through any mode, a pol­icy change made in Au­gust last year to give a boost to food pro­cess­ing.

Re­tail­ers have been lob­by­ing for sim­i­lar ex­cep­tions to be made for gro­cery and per­sonal care items as well. They say con­fin­ing such stores to food product doesn’t make busi­ness sense.

FM Arun Jait­ley said in his Fe­bru­ary 1 bud­get speech that the gov­ern­ment is con­sid­er­ing fur­ther lib­er­al­is­ing the FDI pol­icy. More than 90% of FDI is cur­rently through the au­to­matic ap­proval route. Ama­zon re­cently sub­mit­ted a pro­posal to the gov­ern­ment for set­ting up brick-and-mor­tar stores to sell lo­cally made food prod­ucts along­side its on­line plat­form in In­dia. In an ear­lier pro­posal, the on­line re­tailer had pushed for a hy­brid model un­der which it could sell its own prod­ucts as well as those of in­de­pen­dent sell­ers. This was turned down as it didn’t sup­port the Make in In­dia strat­egy.

Eas­ing re­stric­tions will ben­e­fit pro­duc­ers, ex­perts said.

“It is in the in­ter­est of the In­dian econ­omy to re­lax th­ese rules for re­tail­ers just like they did for man­u­fac­tur­ers,” said Devraj Singh, ex­ec­u­tive di­rec­tor, EY. “Jobs will not be af­fected and over­all man­u­fac­tur­ing will get a boost.” The gov­ern­ment wants to bol­ster man­u­fac­tur­ing as part of its job-cre­ation strat­egy. Man­u­fac­tur­ing has lagged be­hind ser­vices in to­tal FDI.

In­dia’s re­tail sec­tor has been grad­u­ally opened over the years but with mul­ti­ple con­di­tions such as lo­cal sourc­ing rules.

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