FDI in Multi Brand Retail at 51% on the Cards

India may move a step closer next week to opening its $396 billion retail market to foreign companies including Wal-Mart Stores Inc. (WMT) as it seeks to free a legislative process deadlocked for a year by corruption charges.

The cabinet is likely to consider allowing as much as 51 percent of foreign direct investment in stores selling more than one brand, and may consider within two weeks a limit of up to 24 percent in local airlines, government officials said on 16 November, declining to be named, citing the policy of their ministries. Prime Minister Manmohan Singh will present a bill in parliament in the next session, permitting 26 percent ownership in pension funds, a move opposed by left-wing political parties.

Singh’s Congress party-led coalition government has been stung by criticism that there is a paralysis in decision making following a series of high-profile corruption scandals that have led to the jailing of a minister, lawmaker and bureaucrats. Reliance Industries Ltd. (RIL)’s Chairman Mukesh Ambani, India’s richest man, said this week the government needs to do more to push through laws to bolster the economy, which the central bank predicts will expand at the slowest pace in three years.

Restrictions

India bars overseas companies from owning retail outlets that sell more than one brand and allows 51 percent holding in single-brand retail. Wal-Mart, Carrefour SA (CA), which operate wholesale stores in the country, and Tesco Plc (TSCO) are among companies vying for a share of a market that Business Monitor International estimates will double to $785 billion by 2015.

Full foreign ownership of companies that sell a single brand will also be considered, one of the people said. The proposal does not need parliamentary approval.

Policy makers have been debating foreign investment in retail for at least seven years in the face of concerns that mom-and-pop stores will lose their livelihood.