(FE)
The government is weighing a proposal to relax foreign direct investment (FDI) guidelines in food retail to allow a certain percentage of locally-produced non-food items along with the edible products. Although a final decision is yet to be taken by the government, it could allow a FDI-backed retailer to sell locally-produced non-food items worth around 20-25% of its investments at the farm-gate level, said a source. However, some feel the government should keep the rule simple and allow the sale of non-food items at a fixed percentage of overall FDI, instead of the investments at the farm-gate level. Monitoring compliance with the rule would be easy in this case, they argue. It’s not clear what the government would finally decide, as consultations are still on.
The liberalisation of the FDI regime is in sync with the government’s announcement in the Budget for 2017-18. Last month, Prime Minister Narendra Modi chaired a meeting on FDI.
In some markets abroad, retailers invest around 20% of FDI in setting up infrastructure at the farm-gate level. Going by this rough estimate, if the government endorses the proposal to allow sales of non-food items up to 25% of their investment at the farm-gate level, foreign retailers would be able to sell such items worth 5% of the total FDI, along with the food items. Such a step would hardly impact domestic kirana stores but would ensure steady investments at the critical farm-gate level. The non-food items could be related products like personal care or kitchenware etc that consumers would usually like to pick up along with food items in a supermarket.
