The Hindu Business Line : Govt may allow FDI in single product branded retailing

THE Government is likely to allow foreign direct investment (FDI) in single product branded retailing of their own products by foreign companies, the Minister for Commerce and Industries, Mr Kamal Nath, said here today.

This in effect means that foreign companies would be able to sell products through their own retail shops in the country.

Till now this was done through the franchisee route. However, the Minister did not say to what extent FDI would be allowed in this sector.

FDI in retailing, Mr Kamal Nath said, has two aspects. While FDI in general retailing may have an adverse impact in terms of destroying employment of the huge small trading community, who account for almost 94 per cent of the employment in the unorganised sector, there is another retail sector that does not affect the small traders.

"The sector where FDI would not affect employment in the trading sector is the dedicated single product retail sector. This would also help in generating employment," he said.

"While retail is an employment-generating area, FDI allowing big chains like Wal-Mart could result in employment displacement. However, the Government is examining allowing FDI in single brand retail," he said.

According to the Minister, the Government is expecting a quantum jump of around 70 per cent in actual FDI inflows during the current fiscal and expects that FDI inflow would be around $5 billion as compared to $2.8 billion in 2003-04.

He also said that the focus of the Government's FDI policy is to make it dynamic and employment generating.

Mr Kamal Nath also said that the Government was considering further simplifying procedures to facilitate enhanced inflow of FDI into the country which had witnessed a growth of 68 per cent in the first six months (April-September) of the current fiscal to $2.38 billion from $1.41 billion in the corresponding period the previous fiscal.

On the ongoing review of the Press Note 18, which requires foreign companies having existing Indian joint ventures to obtain a no objection certificate from the Indian partner before re-entering the market, the Minister said that the Government was reviewing it. The Government would come out with policy guidelines within a fortnight, he said.

He further said that there would be different set of guidelines for companies that have existing joint ventures from the new entrants.

Regarding the curbing of iron ore export, which had been a long standing demand from the domestic steel industry, Mr Nath said that, "iron ore exports is a very contentious issue because though it generates a lot of employment, it is also blocking our ports. There have been demands from the steel companies also that high grade iron ore should not be allowed to be exported and we also prefer to have value addition in the country only. We are reviewing the policy," he said.

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Govt may allow FDI in single product branded retailing