The cabinet today approved 100 percent foreign direct investment (FDI) in single-brand retail through the automatic route, a move seen to trigger foreign inflows into India’s retail market. Previously, the government’s approval was needed for more than 49 percent FDI in single-brand retail. Welcoming the move, Ajay Dua, former DIPP secretary said, “I would see more inflow of capital into the country. Indian market continues to be attractive for FMCG companies around the world.”

However, the retired IAS officer said that it will not make a very significant difference as the norms have already been eased, and approvals have been expedited to 90 days.”To that extent contribution to making the business easier already done. But, overall this is better,” Ajay Dua told CNBC TV18.

Earlier it was reported that the government was considering allowing 100% foreign direct investment (FDI) through automatic route in single brand retail to attract a larger number of global players in the sector. Earlier, Foreign investment beyond 49% needed government’s nod and was allowed subject to certain conditions, which require products to be of a ‘single brand’ only and to be sold under the same brand globally.

Sandeep Jain, Executive Director of Monte Carlo Fashions said it will not make difference for the Indian players, as many international brands are already there in India. “It makes the process easier certainly, but the brands which want to be there in India are already there,” he told CNBC TV18.

According to the rules, in respect of proposals involving FDI beyond 51%, it is mandatory to source 30% of the value of goods purchased from India, preferably MSMEs. “The move assumes significance as the government wants to provide easy policy for both domestic and foreign investors. Single brand retail trading sector has huge potential to attract FDI,” PTI had reported a source as saying.

For the first time in February 2006, the government allowed 51% FDI in the segment. Foreign investments are considered crucial for India, which needs around $1 trillion for overhauling its infrastructure sector such as ports, airports and highways to boost growth, according to a PTI report. #casansaar (Source - PTI, CNBC, Financial Express)