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100% food retail FDI set to improve Indian F&B purchase


Restaurants will have access to greater options, improved quality & stable pricing, leading to considerable savings in procurement.

Walmart and Tesco are likely to take advantage of the government’s latest liberalisation policy of allowing 100% overseas capital in processed food retailing.

After years of vehemently opposing any foreign investment in multi-brand retail, the BJP-led government sprung a surprise with an unexpected announcement in the Budget that paves the way for retailers such as Walmart and IKEA to sell multi-brand food products as long as they are sourced and manufactured within India. Such ventures, however, must seek approval from the Foreign Investment Promotional Board (FIPB).

Rahul Singh 1“This is a great move. It will allow more capital to flow into India for manufacture in India, that will provide direct employment and availability of world-class products,” said Rahul Singh, managing director, The Beer Café & hon. secretary, NRAI.

Top officials with the ministries of commerce and food processing confirmed that finance minister Arun Jaitley’s announcement in the Budget would allow overseas investment in multi-brand processed food retailing – an area considered sensitive as small retailers fear their businesses will be jeopardised by the entry of large corporations.

That’s welcome news for global retailers that have lately been confused by a growing anti-multi-brand retailing stand taken by the BJP-led government even as India, in 2012, had opened the segment for 51% FDI.

“This decision by the government to allow up to 100% foreign direct investment (FDI) through FIPB in marketing of (processed) food products produced and manufactured in India is very progressive and will help in reducing wastage, helping farm diversification and encourage industry to produce locally. This far-reaching reform will benefit farmers, give impetus to domestic food processing industry and create vast employment opportunities”, said Krish Iyer, CEO, Walmart India.

Walmart has so far shied away from in vesting in multi-brand retailing. In 2013. India allowed 51% FDI in multi-brand retailing. Such ventures come with a host of conditions such as 30% mandatory local sourcing, USD 100 million upfront investment and half of it in back-end infrastructure and many other restrictions.

Food processing minister Harsimran Badal has been advocating FDI in the space and had written to the Prime Minister’s office pushing for 100% FDI in multi-brand retail in the food will benefit processing sector saying farmers, such move would create of give impetus infrastructure, revenue to domestic and uplift the farmers.

Such ventures come with conditions such as 30% mandatory local sourcing, USD 100 million upfront investment, 50% of it in back-end infrastructure.

In 2012, while approving IKEA’s INR 210.5 crore investment proposal, the FIPB had struck down the Swedish retailer’s plans to set up its famous cafes in the stores citing laws that don’t allow FDI in food. Later, the government gave approval to IKEA to set up restaurants as part of its large outlets only to be consumed in the stores.

Similarly, UK chain Marks & Spencer had shown interest a few years ago in selling food items in India but the government had not allowed it fearing a backlash.

Source: NRAI/Economic Times

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