News: Plan panel suggests 49% FDI in Indian retail

(FE 14/04/2006) New Delhi - The government has drawn up a gradual approach to open retail to greater foreign direct investment (FDI). As per a strategy paper prepared by the Planning Commission in consultation with the PMO, an attempt should be made to allow 49% FDI in retail as a first step.

However, keeping in mind the strident opposition from the Left parties, the paper has noted that in case there is sharp resistance to such a move, the government should try for an alternative proposal, allowing 100% FDI in foreign branded, specialised retail chains, which include luxury brands, consumer durables and semi-durables.

The move would advance the present structure, where the government has allowed FDI upto 51% with its prior approval in retail trade of single brand products.

Ideally, the government wants to allow 100% FDI in retail, but the Left is opposed to such a move, arguing it would adversely affect homegrown stores leading to loss of jobs.

Bowing to such pressures, and to make a beginning in the direction, the government, late last year, allowed 51% FDI in retail trade of single brand products. However, it has been subjected to certain conditionalities like such products should be sold under the same brand internationally and single brand product-retailing would cover only products, which are branded during manufacturing.

Any addition to the product categories to be sold under this route would require a fresh approval from the government.