NEW DELHI: Keen to remove
the perception of policy paralysis, the Union Cabinet is set to take up
two long-pending reform moves - allowing foreign retailers to open stores in India and rewrite the 55-year-old Companies Act - on Thursday.
But it is FDI in retail that is being watched more closely as the department of industrial policy and promotion (DIPP) is piloting a proposal to permit the likes of Wal-Mart, Carrefour and Tesco to set up stores through joint ventures where they hold up to 51% stake.
While there may still be doubts about the proposal going through given the opposition from at least one UPA ally - Mamata Banerjee's Trinamool Congress - it is a near certainty that the government will hike the FDI limit for single-brand retail to 100% from 51%. The move will help the likes of furniture maker Ikea and luxury brands such as Louis Vuitton to open exclusive stores.
The two proposals come within days of DIPP moving another note that proposes to allow foreign airlines to acquire up to 26% stake in Indian carriers. The rush of proposals follow some tough talk by India Inc, which publicly said that policy inaction by the Manmohan Singh government was affecting economic growth and forcing many companies to eye foreign shores for business.
Unlike multi-brand, where stores can sell everything from vegetables to electronics, single-brand outlets cater to the upper-end of the market and are not seen as a threat to local outlets.
In both segments of retailing, the government is looking to mandate that at least 30% of the procurement is done from small and medium enterprises.
Multi-brand retail will come with other riders too. For instance, companies will be allowed to operate only in towns that have a population of one million or more. There will, however, be a relaxation in case of large cities, where stores can come up within 10 km of the city limits to help companies deal with real estate prices better.
Companies will have to invest at least $100 million, of which at least 50% will have to be earmarked for creating back-end infrastructure.
Apart from Banerjee's opposition, other allies seem to be on board on the move.
But it is FDI in retail that is being watched more closely as the department of industrial policy and promotion (DIPP) is piloting a proposal to permit the likes of Wal-Mart, Carrefour and Tesco to set up stores through joint ventures where they hold up to 51% stake.
While there may still be doubts about the proposal going through given the opposition from at least one UPA ally - Mamata Banerjee's Trinamool Congress - it is a near certainty that the government will hike the FDI limit for single-brand retail to 100% from 51%. The move will help the likes of furniture maker Ikea and luxury brands such as Louis Vuitton to open exclusive stores.
The two proposals come within days of DIPP moving another note that proposes to allow foreign airlines to acquire up to 26% stake in Indian carriers. The rush of proposals follow some tough talk by India Inc, which publicly said that policy inaction by the Manmohan Singh government was affecting economic growth and forcing many companies to eye foreign shores for business.
Unlike multi-brand, where stores can sell everything from vegetables to electronics, single-brand outlets cater to the upper-end of the market and are not seen as a threat to local outlets.
In both segments of retailing, the government is looking to mandate that at least 30% of the procurement is done from small and medium enterprises.
Multi-brand retail will come with other riders too. For instance, companies will be allowed to operate only in towns that have a population of one million or more. There will, however, be a relaxation in case of large cities, where stores can come up within 10 km of the city limits to help companies deal with real estate prices better.
Companies will have to invest at least $100 million, of which at least 50% will have to be earmarked for creating back-end infrastructure.
Apart from Banerjee's opposition, other allies seem to be on board on the move.
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