News: India may ease some retail investment rules

(RTR 27/12/2006) Mumbai - India may permit foreign investment in some non-food sectors in the tightly-controlled retail industry, newspapers said on Wednesday.

The department of industrial policy and promotion is preparing a note calling for further relaxation of foreign direct investment (FDI) norms, which is likely to be announced before the federal budget in February, the Economic Times said.

The department has listed sports goods, electronics and building equipment as sectors that may be opened up for FDI with a cap of 51 percent, the paper said.

"Since there are hardly any small manufacturers and retailers which will be affected in these areas, the government is likely to allow FDI at both the front-end and back-end," the paper said.

"The government is also considering (permitting) multi-brand retail in such areas."

The Business Standard said the government may also relax norms in stationery and furniture, quoting highly-placed sources.

Commerce Minister Kamal Nath, who told the paper such a move was being considered, said that he was opposed to easing FDI rules in a manner that would affect neighbourhood grocery stores.

"Even if the Left were to agree, my line would be that we cannot allow it," he said, referring to the government's communist allies, who have opposed the move to allow more foreign investment on grounds that it would lead to loss of jobs.

India now allows 51 percent FDI in single-brand retail and 100 percent FDI in wholesale and cash-and-carry operations.

Several luxury retail brands have set up shop in India, while multiple-brand retailers including Metro AG , Shoprite Holdings and Marks & Spencer Plc have opted for cash-and-carry and franchise routes.

India's Bharti Enterprises said last month it would form a joint venture with the world's top retailer, Wal-Mart Stores Inc.