By October, the Centre is expected to pave the way for multibrand foreign retailers to tap the Indian market, by allowing overseas investors in the food retail segment to offer ‘Made in India’ non-food items as well, according to Food Processing Minister Harsimrat Kaur Badal.
The Prime Minister’s Office (PMO) had assured her ministry that the concerned foreign direct investment (FDI) norms would be tweaked as a ‘sweetener’ for foreign investors likely to attend a mega World Food Forum being held in the national capital this November, Ms. Badal said in an interview.
“I have been told the decision would be cleared before World Food India Forum,” Ms. Badal said. “The PMO told me it will be done before World Food summit so October is the last date (but) I think it will be done well before that.”
While India’s $600 billion retail sector, with 70% of it comprising food, is a ‘mind boggling’ proposition for foreign retailers grappling with stagnating growth in the developed world, the minister said that the food-only model was a challenge for them.
India had opened up 100% FDI in multibrand food retail and food processing sectors in early 2016.
Employment generation
“It’s equally important for employment generation. Today, we have got 50% of our youth under the age of 25 looking for jobs. This is not going to kill anybody’s market as we are only processing 10% of our food till now,” said Ms. Badal. The sector had seen a 40% jump in FDI since last year, she added.
“They are all interested. But in the rest of the world, there’s a set format of food and other items and they replicate that business model from country to country.
“Now, just food retail is not only something new, but they also have to rework their business plan,” she said.
Huge investment
Investors had also pointed out that multibrand food retail ventures entailed a lot of investment in infrastructure but the margins had to be really small as one could not be viable with big margins on food, said the minister, who had earlier observed that investments worth $10 billion were waiting in the wings for the right policy framework.
“So the little kirana shop next to them would be selling all imported goods and other items, but they can only sell food. So how do they compete with the small guy like that? This is a fair point,” Ms. Badal said, adding that she had flagged the issue with Prime Minister Narendra Modi.
“Our focus is doubling the farmer’s income and today, the farmer is suffering because he doesn’t even have the basic storage facilities to hold his produce for 2-3 months and get a better rate,” the minister said, adding that food retailers would partner with farmers.
“So if we were to put in a clause that whatever you are spending on retail outlet and whatever you spend on the farm-gate infrastructure, a small portion of that 20%-25% investment, you would be allowed to carry home care items, but those too which are manufactured in India so that it creates employment here,” she said. Even products like shampoos and oil included agricultural output, she added, elaborating on the rationale.
For consumers, in any case, it was more convenient to buy food and small home care items in one place instead of going to different retailers, Ms. Badal added.
