Liberalised FDI norm in single brand retail draws mixed reactions

New Delhi: The Union cabinet's approval of 100 per cent Foreign Direct Investment (FDI) in single brand retail on Wednesday drew mixed reactions with industry observers lauding the move while traders' bodies opposed it as "a serious matter for small businesses".

"This is another positive step from the government towards ease of doing business in India. By allowing 100 per cent FDI in single brand retail under the automatic route, foreign entrants will find it easier to set up operations in the country," said Dhanraj Bhagat, Partner, Grant Thornton India LLP.

However, the Confederation of All India Traders (CAIT) strongly condemned the government's decision stating that the step will affect smaller businesses by paving way for the foreign brands to dominate the country's retail trade.

"The CAIT strongly opposes the move to allow 100 per cent FDI in single brand retail through automatic route as it will facilitate easy entry of multinational corporations in retail trade of India and will also violate poll promise of BJP," the traders' body said in a statement.

"It's a serious matter for small businesses. It is a pity that instead of formulating policies for the welfare, upgradation and modernisation of existing retail trade, the government is more interested in paving way for the MNCs to control and dominate the retail trade of India," it added.

The CAIT also pointed out that such a step will result in a large number of "people being left jobless".

According to Aashish Kasad, India region tax leader, consumer products and retail, EY India, the step will give the Indian consumers access to several international brands.

"Permitting 100 per cent FDI in single brand retail under the automatic route is another progressive step by the Government of India towards attracting foreign investment and ease of doing business in India. This should also generate employment and give the Indian consumers access to several international brands," said Kasad.

Rajat Wahi, Partner, Deloitte India, said: "Global brands across different categories, from apparel to electronics to accessories will be aided through this, providing further options to Indian consumers and improving India's ranking in ease of doing business."

In major changes liberalising FDI in key sectors, the Union cabinet on Wednesday approved 100 per cent foreign investment in single brand retail trading.

"It has now been decided to permit 100 per cent FDI under automatic route," an official release said here, following a Cabinet meeting.

"It has been decided to permit single brand retail trading entity to set off its incremental sourcing of goods from India for global operations during initial five years, beginning April 1 of the year of the opening of first store against the mandatory sourcing requirement of 30 per cent of purchases from India," it added.