Blog: India tries to revive FDI reform

Michelle Russell | 20 July 2012

As foreign direct investment in India fell between April and May, it seems the country's government is again looking at opening up regulations on overseas investment in the local retail sector.

The figures, according to government data reported by the Wall Street Journal this week, show investment fell 38% to US$3.2bn from a year earlier.

At present, India allows stakes of as much as 100% for foreign retailers that are "single brand" but investment in retailers that sell a variety of brands are prohibited.

In November last year the Indian cabinet announced reforms proposals that included a plan to allow foreign companies to own up to 51% of multi-brand retail stores, opening up the market to major retailers.

However, these reforms were put on hold in a bid to win more political support for the policy after widespread opposition to the plans.

India's ruling Congress Party suspended the plans "until and unless there is a consensus of all parties on the matter".

India's commerce minister Anand Sharma has now written to the chief ministers of a number of states that aren't allied with the Congress Party, in a bid to persuade them that backing the introduction of foreign supermarket chains in India would improve the country's supply chain, the WSJ reported.

Supporters argue opening FDI in multi-brand retail could bring in much needed investment to the emerging market, which, after several years of high growth, has seen its economic prospects dim slightly.

With the next session of Parliament due to start in August, we may then have a clearer picture as to whether India's government is likely to declare the policy in effect any time soon.


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