A committee of govt secretaries on Friday approved opening up India's multi-brand retail sector to foreign direct investors, a major step towards opening the sector keenly watched by foreign retail giants.The committee recommended giving foreign firms the chance to take a majority stake of 51% in an investment.
Global retailers such as Wal-Mart Stores, Carrefour, Tesco and Metro AG have long sought greater access to a fast-growing but restrictive Indian retail sector.
The CoS meeting, attended by 10 secretaries, deliberated on the issue for nearly three-hours on Friday.
It is understood to have rejected a proposal that stores with FDI should be asked to sell at least 30 percent of their goods to small retailers.A few secretaries favoured opening the sector for FDI up to 49 percent only, while the majority favoured 51 percent.
The CoS recommendations came after about a year of the Department of Industrial Policy and Promotion (DIPP) floating the idea of opening the sector for FDI.
While the CoS has given its recommendations, the Union Cabinet would have to vet it before FDI could be allowed into the sector.
"This was probably the last meeting of CoS on the issue. Now it will go to the Cabinet," sources added.
The DIPP would move the Cabinet note.
Since large stores require huge space and if the same is not available, the CoS opined that the retailer should be allowed to open shop even within 10 km radius of cities with over one million population.
India currently allows 51% FDI in single-brand retail and 100% in wholesale cash-and-carry operations.
An Icrier report had pegged the size of the sector at about $590 billion.
RIL-BP's USD 7.2 bn deal seen as biggest FDI into India
Mukesh Ambani-led Reliance Industries' USD 7.2 billion deal with British giant BP Plc, cleared by the government on Friday, is seen as the biggest foreign direct investment into India.
The mega transaction, announced in February, was cleared by the Cabinet Committee on Economic Affairs (CCEA).
RIL-BP's USD 7.2 billion deal is seen as the largest Foreign Direct Investment (FDI) after Japanese pharma major Daiichi Sankyo's buyout of Ranbaxy Laboratories for USD 4.5 billion in 2008.
Even though there are other bigger-size proposals, most of them are yet to materialise.
For instance, South Korean group Posco's USD 12 billion investment for a steel plant in Orissa is yet to take off.
Similar is the case with ArcelorMittal's around USD 30 billion investment plans across India.
Another mega transaction worth USD 11 billion was between Vodafone and Hutchison-Essar.
However, there was no direct participation of any domestic firm, as the deal was between two foreign firms.
The latest RIL-BP deal, one of the biggest in the Indian energy space, would see Mukesh Ambani firm selling 30 per cent stake in 23 oil and gas blocks to British entity.
"This is the single largest FDI in the history of India," RIL Chairman Mukesh Ambani had said earlier.
Interestingly, Reliance Industries' failed attempt in 2010 to take control of petrochemicals major LyondellBasell, was valued at over USD 14 billion.
If the transaction had materialised, it would have been the largest ever by an Indian entity.
Going by estimates, last year alone saw the announcement of over 290 inbound transactions worth over USD 22 billion.
Among them were Vedanta Resources' planned USD 9.6 billion acquisition of a majority stake in Cairn India.
Abbott Laboratories' takeover of health care solutions business of Piramal Healthcare in a USD 3.7 billion deal and Japanese entity JFE Steel Corp's USD 1 billion investment in JSW Steel were among other big transactions.
The NTT DOCOMO-Tata Teleservices joint venture worth USD 2.70 billion also brought in significant FDI inflows into India.
Among the top deals involving Indian entities are USD 10.7-billion Bharti-Zain transaction and Tata's USD 12 billion-buyout of Corus.
Other major transactions involving Indian entities are Hindalco's buyout of Novelis for USD 6 billion and ONGC -Imperial's USD 2.80 billion deal.
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