‘Strong case to revisit restrictive FDI retail policy’

Mumbai, Jan 14: Domestic ratings agency Icra has said there is a “compelling case” to revisit the “restrictive” retail foreign direct investment (FDI) policy as India has not been able to get sizeable investments despite opportunities.
Citing examples of other emerging geographies to allay concerns, the agency said organised and unorganised retail can co-exist.
The multi-brand retail sector remains “most restrictive” to FDI, with a cap of 51% ownership and guidelines relating to mandatory investments in back-end infrastructure and local sourcing norms, it said.
“There is a compelling case for the government to revisit its FDI policy. The investment requirements of the sector are sizeable,” its vice president and co-head for corporate sector ratings Kinjal Shah said.
According to data released by the Department of Industrial Policy and Promotion, India received $1.4 billion in FDI in the retail sector between 2000 and 2018, which is only 0.36 per cent of the overall FDI inflows, it said.
The agency said a population of over 1.3 billion with favourable demographics and a rising middle class present a big opportunity for foreign retailers, who have actually evinced interest.
Icra said “restrictive nature of the retail FDI policy” has curtailed the foreign retailers’ operations. Shah said there remains on-ground opposition for multi-brand retail from local traders, who fear risk of being thwarted by the deep pockets and increased competition from foreign players.
Pitching for relaxation in inter-segmental restrictions for multi-brand retail, Shah also said India needs to up the caps on foreign ownership in the segment.