51 pc FDI in single brands cleared

New Delhi: The Centre has approved major reforms in foreign investment, including opening up its vast retail market to brands like Nike on Wednesday.

"This is the first time in 15 years that the entire FDI (foreign direct investment) policy has been reviewed in an integrated manner to remove anomalies and inconsistencies," Commerce Minister Kamal Nath said.

Nath explained that the Government's move to allow 51 per cent foreign investment in retail stores for single brand name products will create jobs, rather than adversely affect employment among small store-owners in the country.

He also added that the new policy would allow companies like sports giants Reebok International and Nike to have majority ownership of their Indian chains.

But firms like US-based WalMart would not qualify as single brand retailers and hence will not be allowed to enter the Indian market, according to estimates by consulting firm McKinsey and Co.

A single brand name is used to "masterbrand" all products or services in a range whereas multiple branding is marketing two or more mutually competing products under different brand names by the same company.

Meanwhile, the Left has been opposing FDI in retail trade on the grounds that the small kirana shops will not be able to face competition from the MNCs and that there will be loss of employment.

Nath, however, rejected the concerns. "This in any way does not cause any replacement or displacement as it is already happening through franchise," he said.

"Retailing of goods of multiple brands, even if such products are produced by the same manufacturer would not be allowed," Nath added.

At present, single brand retailers operate through franchises. Apart from retail, other sectors, which have been liberalised are power trading, processing and warehousing of rubber, coffee and diamond and coal mining. In these sectors, 100 per cent foreign investment will be allowed.

In other sectors, the Cabinet removed multiple layers of approval required for investment.

"This is not so much an exercise to revise caps, as to simply rationalise the procedures," a Government statement said.