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Legal pulse: 100% FDI in multi-brand retail a possibility?

The commerce and industry ministry may propose to allow 100 per cent foreign direct investment (FDI) in multi-brand retail outlets, according to an unnamed source in the department quoted by the Economic Times today.

"We are preparing the paper that will be placed for public debate in some time," a senior official of the department of industrial policy and promotion (Dipp), the nodal body for foreign investment policy, told ET.

Though the earlier view within the department was to keep the FDI limit at 51%, same as in single-brand retail, it has veered around to keeping it much higher and even pegging it at 100% to have an intense debate on the subject, he added.

A final decision on the proposed cap will be taken after deliberations with the consumer affairs ministry, the nodal department for retail, he said. [...]

The [proposed retail] paper is also expected to make it mandatory for big multi-brand foreign retailers to create a back-end cash-and-carry for small shopkeepers, giving them benefit of scale on the sourcing side.

“The idea is that big multi-brand retail outlets should enable growth of small retailers and not threaten their existence,” the official said.

Mandatory domestic procurement will ensure improved returns for farmers while strong back-end linkages will contribute to the development of food processing and cold chains in the country.
The proposal, if implemented, could ease the current legal difficulties related to FDI in multi-brand retail.

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