Jan. 24: Armani, Louis Vuitton, Canali and Hugo Boss can stroll into India’s brandscape through joint ventures in which they can now call the shots.
But the gates have not been opened yet for large-format retailers like Wal-Mart, Carrefour, Tesco and Harrods.
In a bold reform move, the government today permitted foreign direct investment up to 51 per cent in the retail sector. Besides, in cash and carry wholesale trading, where groups such as the German Metro are operating, 100 per cent foreign investment can be made without approval.
It also liberalised foreign investment in new airports, power trading, diamond and coal mining, processing and warehousing of rubber and coffee, and petroleum infrastructure like pipelines. In these sectors, FDI up to 100 per cent will be allowed through the automatic route.
“This is the first time in 15 years that the whole FDI policy has been reviewed in an integrated manner, to remove anomalies and inconsistencies,” commerce minister Kamal Nath said after a cabinet meeting.
Nath clarified that the issue of allowing FDI in the overall retail sector was still being studied by the government. “Its ramifications are being examined.”
For all practical purposes, however, retail has been opened up by allowing 51 per cent FDI in single-brand outlets, a decision the Left may not take kindly.
The minister, however, argued that single-brand stores would not result in “replacement and displacement of existing labour nor would it affect the business of the neighbourhood kirana store”.
Nath said retailing of multiple brands, even if such products were produced by the same manufacturer, would not be allowed.
“It is not a major move, but it is definitely a small step towards opening the retail sector,” said Arvind Singhal of KSA Technopak, the retailing consultancy.
Even now single-brand retailers are allowed to sell, but only through a franchisee.
The government has also relaxed conditions for 100 per cent FDI in business-to-business e-commerce.
It decided to allow FDI up to 100 per cent for distillation and brewing of potable alcohol, industrial explosives and hazardous chemicals through the automatic route.
There will be no need to seek approval from the Foreign Investment Promotion Board for transfer of shares in an Indian company from local to foreign investors in financial services.