India said to mull backing foreign investment in supermarkets
New Delhi, India - India is considering a proposal to lift a cap on investment by foreign retailers in local supermarkets, according to people with the knowledge of the matter.
Indian Prime Minister Narendra Modi on Friday held a meeting with senior government functionaries to review the country’s current foreign direct investment (FDI) policy.
Commerce and Industry Minister Nirmala Sitharaman, among others, attended the meeting which was held at the Prime Minister’s residence. The meeting is understood to have discussed measures to further liberalise the policy, so as to attract more FDI in various sectors
The meeting said to have discussed a proposal to allow 100 per cent investment by retailers such as Wal-Mart Stores Inc and Carrefour SA if they agree to sell locally made products and invest at least US$100mn, according to people with the knowledge of the matter who asked not to be identified.
The move is a partial reversal of Modi’s opposition to foreign retailers as he attempts to create jobs even at the expense of alienating his core support base - traders.
After coming to power in 2014, Modi’s administration barred foreign investment in multi-brand retail, enacted by the previous government, to fulfill a key campaign pledge.
The proposal to ease rules has other riders attached. Retailers will have to spend at least US$50mn on storage and logistics infrastructure and employ 1,000 people for every US$100mn of investment, apart from sourcing 30 per cent of their products from small companies, the people said.
Jagdish Thakkar, a spokesman in the Prime Minister’s Office, didn’t return calls seeking comment, while Ministry of Finance’s spokesman D S Malik didn’t answer calls.
Local traders are opposed to foreign retailers setting up stores India, saying the move will endanger their livelihood. The current FDI policy permits overseas companies to own a stake of up to 51 per cent in an Indian company for multi-brand retail even though the policy has never been implemented.
The Food Processing Ministry has been pushing to partially ease rules for retailers that would allow them to sell soaps, shampoos and toothpastes along with food products. Food Processing Minister Harsimrat Kaur Badal in an interview in May said the move could lead to at least US$10bn in the sector over the next two to three years.
India’s food and grocery market is the world’s sixth largest, with retail contributing 70 per cent of sales. Food is one of the largest segments in India’s retail sector, valued about US$600bn. India attracted US$935.74mn FDI in retail trading from April 2000 to December 2016.
Some of the foreign retailers have either closed down or curtailed operations due to policy uncertainty. In 2013, Wal-Mart ended its India wholesale joint-venture after facing troubles in the country where it was investigated by the government as well an internal probe for violations of US anti-corruption laws.
Carrefour SA, France’s biggest retailer, closed its five Indian wholesale stores last year, ending its four year presence in the South Asian nation.
Groupe Auchan SA, another French supermarket operator, in August ended its franchise agreement with billionaire Micky Jagtiani’s Landmark Group.