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Opening of the retail sector to FDI in India is a welcome step, the article discusses some of the key changes pertaining to revised FDI policy.
The Indian retail sector has tremendously grown over the last decade with a significant shift towards organised retailing format. India’s retail market contributes to over 10 percent of the country’s Gross Domestic Product (GDP). The share of the Indian retail market is expected to increase by 60 percent to reach USD 1.1 trillion by the year 2020. the government of India has revised its foreign direct policy (FDI Policy) to allow foreign direct investment (FDI) in the retail sector subject to certain conditions. Some of the key changes in food retail are discussed below: The FDI Policy allows 100 % FDI in entities engaged in food retail however, the FDI Policy treats food retail different from other retailing provisions (whether single brand retail trading or multi brand retail trading). Retailing of food products produced / manufactured in India (whether single brand retail trading or multi brand retail trading) including via e-commerce requires prior Government approval. Although not expressly mentioned, it may be inferred that retailing of imported food products is not permitted by entities in India having foreign investment.
Good presentation, useful blog
Dear Mr. Arjun Anand,What is the basis of the inference, “that retailing of imported food products is not permitted by entities in India having foreign investment? Please clarify.Best Regards,Karthik
Dear Karthik,Thank you for your query. Please refer to our analysis on your query, below:Paragraph 5.2.5.2 of the FDI Policy, 2017 (hereinafter referred to as “FDI Policy”), states the following:“Notwithstanding the FDI policy provisions on trading sector, 100% FDI under Government approval route is allowed for retail trading, including through e-commerce, in respect of food products manufactured and/or produced in India.”It may be noted as per the abovementioned paragraph, that the FDI Policy expressly enables 100% (one hundred percent) foreign direct investment (“FDI”) under Government approval route for retail trading including retail trading through e-commerce, only with respect to food products manufactured and/or produced in India and does not enable any FDI under Government approval route for retail trading with respect to any imported food products, i.e. food products not manufactured and/or produced in India. Since the FDI Policy is to be interpreted only as per what is expressly allowed or enabled by it, we understand that FDI is not permitted for entities in India involved in the retail of imported food products.Please feel free to reach out to us in case of any further queries.Best,Arjun.
This post is very informative on this topic, Thank you for sharing
Dear ArjunI disagree with your interpretation: Retail trading in imported food products is completely permissible in India. There is no specific bar on this retail trading of imported food products. As stated by you, approval route is required for food retail trading where food is manufactured in India. Clause 5.2(a) of the FDI Policy expressly states “Insectors/activities not listed below, FDI is permitted up to100% on the automatic route,subject to applicable laws/regulations; security and other conditionalities”. In any event, imported food retail trading will come within either multi-brand or single brand and will be treated accordingly.
