Some good news for global retail chains like tesco, toys ‘r’ us, marks & spencers, walmart. the government is getting its act together to allow foreign direct investment in retail sector.
After a lot of dilly-dallying, the industry ministry has sent its recommendations to the group of ministers to allow FDI in retail sector with a few strings attached.
In a note to gom for approval, the industry ministry has laid out minimum capitalisation conditions for foreign retail companies interested in setting up 100 per cent subsidiaries as well as joint ventures with the indian partners. recognising the scope in retail, the industry ministry has stated that with reforms the retail productivity can increase 2.5 times and annual output by 12 per cent, if FDI is allowed.
According to recommendations, a foreign retail chain wanting to set up a 100 per cent subsidiary will have to meet minium capitalisation norms which stipulate that the foreign company will invest $10 million for setting up of a retail chain without any restriction on the number of outlets.
The company, however, will have to invest only $ 1 million for a single outlet entry. similarly, in case the foreign company envisages setting up a joint venture with FDI exceeding 75 per cent but less than 100 per cent, the company will have to invest $5 million with no restriction on number of outlets and $0.5 million for a single outlet entity.
IIn case of a joint venture with FDI exceeding 50 per cent, but less than 75 per cent, the foreign company will need to meet the capitalisation norms with $ 2 million for no restriction in numbers and $0.2 million for a single outlet.
