http://pib.nic.in/newsite/PrintRelease.aspx?relid=77619 Background Material on Cabinet Decision on the FDI in Retail

1. INFORMATION
FOR
PEOPLE

2. PLEASE TAKE FEW MINUTES
AND READ ABOUT THE CABINET
DECISION ON FDI IN RETAIL

3. EXISTING POLICY
-FDI In Multi Brand Retail Trading (MBRT)
Is Prohibited.
- FDI, Up To 51%, In The Single Brand
Retail Trading (SBRT) Sector, Is Permitted,
Under The Government/FIPB Route.

4. RATIONALE FOR LIBERALIZATION
Leveraging foreign investment
in supply chain infrastructure

5. RATIONALE FOR LIBERALIZATION
Lack Of Investment In The
Logistics Of Retail Chain Creating
Inefficiencies In The Food Supply
Chain.

6. RATIONALE FOR LIBERALIZATION
Though India Is The Second Largest Producer Of
Fruits And Vegetables (About 200 Million MT),
It Has A Very Limited Integrated Cold-chain
Infrastructure, With Only 5386 Stand-alone Cold
Storages, Having A Total Capacity Of 23.6 Million
MT, 80% Of This Is Used Only For Potatoes.

7. RATIONALE FOR LIBERALIZATION
Lack Of Adequate Storage Facilities Cause Heavy
Losses To Farmers In Terms Of Wastage In Quality Of
Produce In General, And Of Fruits And Vegetables In
Particular. Post-harvest Losses Of Farm Produce,
Especially Of Fruits, Vegetables And Other
Perishables, Have Been Estimated To Be Over Rs.1
Trillion Per Annum, 57 Per Cent Of Which Is Due To
Avoidable Wastage And The Rest Due To Avoidable
Costs Of Storage And Commissions.

8. RATIONALE FOR LIBERALIZATION
As Per Some Industry Estimates, 35-40% Of
Fruits And Vegetables And Nearly 10% Of Food
Grains In India Are Wasted. Though FDI Is
Permitted In Cold-chain To The Extent Of 100%,
Through The Automatic Route. In The Absence
Of FDI In Front-end Retail, Investment Flows Into
This Sector Have Been Insignificant.

9. RATIONALE FOR LIBERALIZATION
Indian Farmer Realizes Only 1/3rd Of The Total
Price Paid By The Final Consumer As Against
2/3rd With Higher Degree Of Retail. A World Bank
Study Of 2007 Demonstrates That The Average
Price A Farmer Receives For Horticulture Produce
Is Barely 12 To 15% Of What Is Paid At The Retail
Outlet.

10. RATIONALE FOR LIBERALIZATION
An 11th Plan Working Group Has Estimated a
Total Investment Of Rs. 64,312 Crores In
Agricultural Infrastructure. A Storage Capacity
Gap Of 35 Million Tonnes Has Been
Assessed, Requiring An Estimated Investment
Of Rs. 7,687 Crores During The 11th Plan.

11. SUPPLY CHAIN EFFICIENCIES
Foreign Retail Majors Have Gained
Decades Of Experience,
Technologies And Management
Practices Which Will Ensure Supply
Chain Efficiencies.

12. IMPACT ON FOOD INFLATION
The opening up of Multi Brand Retail will
also have a salutary impact on food
inflation as it would contribute to savings
to the food which perishes on account of
inadequate infrastructure.

13. PRICES FOR THE FARMERS
In the present dispensation, there is a complex
chain of procurement involving several
middlemen. FDI in retail will create the enabling
environment which will ensure direct procurement,
at least of horticultural produce from farmers to
enable them secure remunerative price

14. EMPLOYMENT OPPORTUNITIES
Huge Investments In The Retail Sector Will
See Gainful Employment Opportunities In
Agro-processing, Sorting, Marketing, Logistic
Management And The Front-end Retail
Business.

15. EMPLOYMENT OPPORTUNITIES
Industry Estimates Suggest Employment Of
One Person Per 350-400 Sq.Ft Of Retail
Space, About 1.5 Million Jobs Will Be
Created In The Front-end Alone In The Next 5
Years.

16. EMPLOYMENT OPPORTUNITIES
Assuming that 10% extra people are
required for the back-end, the direct
employment generated by the organized
retail sector in India over the coming 5
years will be close to 1.7 million jobs

17. EMPLOYMENT OPPORTUNITIES
Indirect Employment Generated On
The Supply Chain To Feed This
Retail Business Will Add
Millions Of Jobs.

18. FDI POLICY IN OTHER COUNTRIES
CHINA - 100% FDI LIMITS
THAILAND - 100 % FDI LIMITS
RUSSIA - 100% FDI LIMITS
INDONESIA- 100 % LIMITS

19. FDI POLICY IN OTHER COUNTRIES
Brazil, Argentina, Singapore &
Chile allow 100% FDI in retail sector
while Malaysia permits FDI to a
certain limit.

20. CABINET DECISION
FDI In Multi Brand Retail Trade
(MBRT) May Be Permitted Up To
51%, With Government Approval

21. The Chief Ministers of Delhi, Assam,
Maharashtra, Andhra Pradesh,
Rajasthan, Uttarakhand,
Haryana,Manipur,Jammu & Kashmir
and the Union Territory of Daman & Diu
and Dadra and Nagar Haveli, have
expressed support for the policy

22. Retail sales outlets may be set up in those
States which have agreed or agree in
future to allow FDI in Retail under this
policy. The establishment of the retail
sales outlets will be in compliance of
applicable State laws/ regulations,such
as the Shops and Establishments Act etc.

23. CABINET DECISION
Fresh agricultural produce, including
fruits, vegetables, flowers, grains,
pulses, fresh poultry, fishery and
meat products, may be unbranded.

24. CABINET DECISION
Minimum Amount To Be
Brought In, As FDI, By The
Foreign Investor, Would Be US
$ 100 Million

25. CABINET DECISION
At Least 50% Of Total FDI
Brought In Shall Be Invested In
'Backend Infrastructure'

26. CABINET DECISION
At least 30% of the
procurement of manufactured/
processed products shall be
sourced from 'small industries'

27. CABINET DECISION
Retail sales locations may be set up
only in cities with a population of
more than 10 lakh as per 2011 Census
only 53 cities qualify for FDI in multi-
brand retail out of nearly 8000
towns and cities

28. CABINET DECISION
The FDI In Multi-brand Retail Is Being
Opened In 53 Cities Only With
Population Of 1 Million And For The Rest
Of The Country, Current Policy
Regime Will Apply

29. CABINET DECISION
Retail locations will be restricted to
conforming areas as per the
Master/Zonal Plans of the concerned
cities and provision will be made for
requisite facilities such as transport
connectivity and parking

30. CABINET DECISION
Government will have the first
right to procurement of
agricultural products

31. CABINET DECISION
A high-level group under the Minister of
Consumer Affairs may be constituted to
examine various issues concerning
internal trade and make
recommendations for internal trade
reforms.

32. CONDITIONS
FDI in single brand retail
trading may be permitted up to
100% with Government
approval

33. CONDITIONS
Products Should Be Sold Under The
Same Brand Internationally I.E.
Products Should Be Sold Under The
Same Brand In One Or More
Countries Other Than India

34. CONDITIONS
‘Single Brand’ Product-retailing
Would Cover Only Products
Which Are Branded During
Manufacturing.

35. CONDITIONS
The foreign investor should
be the owner of the brand.

36. CONDITIONS
In respect of proposals involving FDI
beyond 51%, 30% sourcing would
mandatorily have to be done from
SMEs/ village and cottage industries
artisans and craftsmen.

37. Condition of 30% sourcing from small
scale sector
This condition will ensure that our SME
sector, including artisans, craftsman,
handicraft and cottage industry benefits,
especially in sectors like textiles, gems
and jewellery, leather and jute.

38. Rationale for enhancing FDI ceiling to
100% in single brand retail trading
In the last 5 years, under the current regime of
51% FDI in single brand retail, foreign direct
investment of only US$ 44.45 million have
been received, constituting barely 0.03% of
total FDI inflows.

39. Rationale for enhancing FDI ceiling to
100% in single brand retail trading
Globally, single brand retail follow a business
model of 100% ownership and global majors
have been reluctant to establish their
presence in a restrictive policy environment.

40. Rationale for enhancing FDI ceiling to
100% in single brand retail trading
The current cap of 51% confers a right to pass
all ordinary resolutions, while enhancing cap
to 100% will confer full ownership and control.

41. For More :
http://pib.nic.in/newsite/erelease.aspx?relid=77619
http://pib.nic.in/newsite/erelease.aspx?relid=87768
Web conference by Hon’able Minister
http://pib.nic.in/newsite/webcastplay.aspx?webcastid=149

42. JAI HIND