On September 14, 2012, the Government of India (GOI) again approved 51 percent foreign direct investment (FDI) in multi-brand retail.
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GAIN Report Number: IN2120
Post: New Delhi
India Approves Foreign Direct Investment in Multi-Brand
Agriculture in the News
Trade Policy Monitoring
The Government of India has again approved foreign direct investment in multi-brand retail. The
government suspended implementation of the policy in late 2011. The new policy is largely unchanged
from the 2011 policy, but emphasizes the role of the states in approving investment and sets a three-
year time limit for firms to complete their investment in “backend” operations. Several Indian states
have indicated that they will likely support investment.
Foreign Direct Investment in Multi-Brand Retail Approved
On September 14, 2012, the Government of India (GOI) again approved 51 percent foreign direct
investment (FDI) in multi-brand retail. The GOI had approved a similar proposal on November 24,
2011, but suspended the decision on December 7, 2012. This latest announcement lifts the suspension
and establishes procedures for foreign retailers and hypermarkets, which have thus far been limited to
wholesale operations, to invest in the Indian market subject to certain requirements.
The latest policy upholds the provisions of the original policy while amplifying the role of the states in
the approval process; stressing that new retail outlets can only be established in states that support the
policy. The announcement indicates that the chief ministers of Delhi, Assam, Maharashtra, Andhra
Pradesh, Rajasthan, Uttarakhand, Haryana and several union territories have indicated their support for
FDI in multi-brand retail. This could open Delhi and its surrounding edge cities to investment as well as
the major metropolitan areas of Mumbai and Hyderabad. The GOI indicated that six states have
expressed reservations; the positions of India’s remaining states were not mentioned. The new policy
continues the requirement that firms direct 50 percent of their investments to the development of
“backend” infrastructure, but places a time limit of three years for firms to complete this investment.
The GOI approved 100 percent FDI in single-brand retail in January 2012 and relaxed certain provisions
in a separate September 14, 2012 announcement. Chiefly, foreign investors need not be the owner of
the retail brand and companies can source products from any Indian supplier. The previous policy
required investors to source up to 30 percent of their products from small and micro enterprises.
A summary of key provisions from the November 2011 policy follows with key updates from the
recently announced policy in italics.
Foreign direct investment will be allowed at up 51 percent foreign equity subject to government
approval. Individual states will have final approval.
A foreign company must invest at least $100 million initially, at least 50 percent of which is
required to be in back-end infrastructure, such as supply-chain operations. The investment in
backend operations must be completed within three years.
Investors will have to source 30 percent their products from “micro and small” industries with no
more than $1.0 million in capital investment.
Foreign direct investment will only be allowed in retail stores operating in cities with
populations of over one million. According to the Commerce Ministry, there are 53 cities that
meet this criterion.
Readers can access the latest press releases concerning the new policy via the following links:
The following reports may be of interest to U.S. stakeholders interested in India. These, and related
reports prepared by this office, can be accessed via the FAS Home Page: www.fas.usda.gov by clicking
on “Attaché Reports” and searching by the report number. Reports given below will provide additional
information to exporters interested in the Indian market.
Report Number Subject
IN1208 The Government of India Approves FDI in Multi-Brand Retail
IN1215 Exporter Guide
IN1211 India Suspends Multi-Brand Retail Policy
IN2059 India’s Food Retail Sector Growing