The Central Cabinet has finally paved the way for the entry of global retail giants into India. On a day of big-ticket reforms, the Cabinet cleared the way for multi-brand giants such as Wal-Mart, Tesco and Carrefour to open independent multi-brand retail outlets in the country.
Foreign direct investment (FDI) of up to 51 per cent has been allowed in multi-brand retail. Simultaneously, the Cabinet also gave the nod for upping the FDI limit in single-brand retail ventures to 100 per cent.
The government had in February 2006 permitted 51 per cent FDI in single-brand retail. The policy will allow multi-brand foreign retailers to set up shop only in cities with a population of more than 10 lakh as per the 2011 Census. There are 55 such cities. It means big retail chains can move beyond the metros to smaller cities.
The clearance comes with several riders. Foreign investors will be required to put up 50 per cent of total FDI in back-end infrastructure. Such infrastructure will include capital expenditure on all activities, excluding that on front-end units. Expenditure on land cost and rentals will not be counted for purpose of back-end infrastructure.
