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Government Rules Out FDI In Multi-Brand Retail

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The National Democratic Alliance (NDA) government has said it will not allow foreign direct investment in multi-brand retail, a move that will disappoint international brands hungry for a slice of India's vast retail market.
 
"We are clear that FDI will not be allowed in multi-brand retail trade (MBRT). We shall not entertain FDI in MBRT. There is no ambiguity. There is no confusion on this," Commerce and Industry Minister Nirmala Sitharaman said in New Delhi on Monday while addressing a press conference to mark 100 days of the new Bharatiya Janata Party-led government.
 
The Narendra Modi govenment, which is opening up new areas, inlcuding defence manufacturing and railways, to foreign investors is viewed as pro-business.
 
Sitharaman said her party, the BJP, has clearly articulated its position on the MBRT and had won the elections on the basis of its manifesto.
 
The previous United Progressive Alliance government had opened the multi-brand retail sector for foreign investment and allowed up to 51 per cent FDI in the sector.
 
The politically sensitive multi-brand retail segment in India employs millions and is dominated by mom-and-pop stores.
 
While the new government is against FDI in the sector, it has not yet initiated any move to scrap the policy of allowing FDI in multi-brand retail approved by the UPA government in September 2012.
 
During the UPA regime, only one investment proposal of UK-based Tesco, the world's third largest retailer, was cleared for the sector.
 
The British retailer had announced an investment of $110 million to launch stores in a 50-50 venture with Trent Hypermarket Ltd, Tata Group's retail unit that operates Star Bazaar.
 
Foreign chains such as US-based Walmart and French group Carrefour have been looking to set up their supermarkets in a market of 1.2 billion people with a large middle class. The retail sector is estimated more than $500 billion.
 
The previous Congress-led government had favoured FDI reforms in retail, hoping these would bring in funds, generate employment and modernise the sector.
 
Carrefour in July announced it would exit the Indian market. According to reports, Walmart will take over three of the wholesale stores run by Carrefour in India.
 
Sitharaman said that FDI in multi-brand retail would not be allowed in any form, not even through the e-commerce route.
 
"There was an impression what have not been achieved in MBRT, will be done through backdoor in e-commerce. What is applicable at the moment in MBRT is applicable also for e-commerce," she added.
 
FDI in e-commerce is only permitted for business-to- business activities but prohibited for business-to-consumer.
 
Indian regulators are investigating whether Amazon.com has broken local laws with its retail practices in the country.
 
The Finance Ministry's Enforcement Directorate is looking into whether the company's local subsidiary may have sold directly to customers, but made it look as if the sales were made by other companies, according to a Wall Street Journal report.


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