Govt for FDI in retail brands

Move seen as attracting investment in employment generating sector.

The government today said it is considering allowing foreign direct investment (FDI) in the 'branded and dedicated retail segment' to attract more investment in employment generating sectors.

"The FDI policy cannot be static. It has to be a dynamic policy. There are some areas where employment generating potential is very high. The government is considering those sectors. This is as per our commitment made in the Commom Minimum Programme," said Commerce and Industry Minister Kamal Nath at a media briefing.

Asked if the government was open to allowing FDI in retail, which is perceived as an employment generating sector, Nath said, "There are sectors within retail which rock the boat of our small traders. We are not in favour of touching those. But there is another type of retail which does not affect small traders. This is namely the dedicated and branded retail sector. We are looking at that end".

The minister clarified that the government was not in favour of allowing FDI in retail sectors like Wal Mart but in case of dedicated sales which were presently permitted through franchisees.

Already, multi-national corporation apparel retailers like Benetton, Marks & Spencer and the fast food chain McDonalds are present in the country through franchisee and licensing arrangements.

"Assuming that the minister is talking about speciality retailers who source, manufacture, set up stores and sell products under their own brandname, it could open up opportunities for multi-billion dollar apparel retailers like GAP, Zara and H&M," said Arvind Singhal, chairman, KSA-Technopak.

Nath said the government was considering enhancing the FDI cap limit in some other employment generating sectors.

In addition, procedural simplification measures to facilitate enhanced FDI inflows were also on the anvil.

The minister said that the government would within the next fortnight announce the revised norms under Press Note 18.

He indicated that the revised norms would contain separate provisions for future and existing joint ventures which were presently under the purview of Press Note 18.

The policy makes it mandatory for foreign partners to take a no-objection certificate from the Indian partners for fresh investments in the country.

Nath said India had attracted $2.38 billion in FDI during the first six months of 2004-05, 68 per cent higher than the $1.41 billion it attracted during the corresponding period last year.

He said India was likely to attract $5 billion in FDI this fiscal, a growth of nearly 70 per cent compared to around $ 2.8 billion last fiscal.

The minister said that the improved investment climate saw an impressive 24 per cent growth in exports despite the fact that the rupee had strengthened against the dollar and that oil prices had hit an all time high.

"The value of the dollar should not be artificially calibrated. It must find its own level. The exporters have to learn to live with it and they are," he said when asked if the government was considering measures to protect exports in the wake of a stronger rupee.