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If state govt permits, capital fit for FDI

The Union government’s decision to open the retail sector to foreign direct investment (FDI) has triggered a nationwide furore. Not only the NDA-led opposition but even some UPA constituents are opposing the move on the ground that it would hit small traders hard. The NDA has called a Bharat bandh on September 20 and the JD(U) is supporting it

What’s FDI in retail ?

The Union government has decided to open up the retail sector to global investors through foreign direct investment (FDI) in multi-brand retail with a ceiling of 51 per cent.

What does it mean?

It means that global retailers such as Walmart, Carrefour or Tesco can set up mega stores in the country through joint ventures with Indian firms, where the foreign partner can hold up to 51 per cent equity. Foreign retailers will have to invest a minimum of $100 million, and put at least half of their total investment into “back-end” infrastructure, such as warehousing and cold storage facilities.

How some of the companies mentioned above already have stores in India then?

They are wholesale cash-and-carry stores where only institutions can buy, not consumers.

How will foreign retailers source their requirements?

Foreign retailers will have to source almost a third of their manufactured and processed goods from industries with a total plant and machinery investment of less than $1 million. The government will reserve the first right to procure food produce from farmers before any of these companies. This is imperative to provide stocks for its food subsidy schemes for the poor.

Do states have a choice in the matter?

Yes individual state governments can decide whether to allow foreign supermarket chains entry into their areas or not.

Is there a criterion for the kind of cities where FDI retail outlets can be opened?

Foreign retailers will only be allowed to open stores in cities with a population of more than 1 million. In states where there are no cities with such a big population, individual state governments can choose where to allow foreign chains to open stores.

Is there any city in Bihar with a population of 1 million?

Yes. Patna.

What is Bihar government’s stand on FDI in retail?

Chief minister Nitish Kumar is against FDI. According to him, farm to mart concept does not exist anywhere in the world and there has to be a supply chain.