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Is The NDA Warming Up To FDI In Multi-brand Retail?

Union Food Processing Industries Minister Harsimrat Kaur Badal has pitched for 100 per cent FDI in multi-brand retail in the fruits and vegetables segment

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The Union Budget 2016-17's proposal to allow 100 per cent FDI in marketing and processing of food products raises a question: Is this a step by the NDA government towards further relaxing FDI in retail? The question bears asking since the BJP had opposed FDI in retail during the time that the UPA 2 government was in power.

While the fine print on the measure is yet to be revealed, there is some reason to believe that this could indeed be a move towards making further allowances for FDI in retail.

As per recent reports, Union Food Processing Industries Minister, Harsimrat Kaur Badal, has already pitched for 100 per cent FDI multi-brand retail in the fruits and vegetables segment, provided that it is locally sourced. On any other occasion, a statement like this would be chalked up as a single minister's suggestion.

However, at a time when a broadly similar idea has been mentioned in a budget as well, it could indicate that the NDA government has warmed up to the idea of FDI in retail. The fact that 100 per cent FDI in food processing is already allowed, further suggests that the relaxation will fall under retail.

As per the existing policy, India already allows 100 per cent FDI in single brand product retail, of which 49 per cent is automatic, and beyond that is through the government route. However, in the case of multi-brand retail, 51 per cent FDI is permissible through the government route. The budget speech clearly says that the relaxation in FDI in marketing and processing of food products will be through the FIPB route, from which it can be inferred that it was referring to multi-brand retail only.

As per the budget-think, the policy will "benefit farmers, give impetus to food processing industry and create vast employment opportunities", citing the fact that fruits and vegetables produced by Indian farmers either do not get the right price of fail to reach the markets. With a strong focus on the rural economy and agriculture, this policy move can be seen in the larger context of the developmental agenda. It is entirely possible, that the government would still steer clear of further liberalising other areas of multi-brand retail.

Ultimately, the details on the policy will finally reveal what the government truly has in mind, but for now, it sure seems to be tending towards more FDI in multi-brand retail.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

Manika Premsingh

Economist and Founder, Orbis Economics

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