Govt clears Amazon’s $500-mn FDI proposal in food retail

The Dollar Business Bureau

In a move to attract major foreign investment, the Government on Monday approved an investment of around $500 million proposed by e-commerce giant Amazon for opening retail food stores in India.

This is the first proposal for foreign direct investment (FDI) in food retail that got the government’s approval. This is also the first FDI case that gets an in-principle approval after the recent shut down of the Foreign Investment Promotion Board (FIPB).

This proposal was pending with the FIPB. Therefore, the Department of Industrial Policy and Promotion (DIPP) has given its nod to the proposal.

According to the proposal, the American ecommerce major will open a fully-owned arm in India for carrying out the business of storing food products and sell them online.

Presently, the Government allows 100% FDI in food processing sector. According to the rules, a foreign firm can open a fully-owned subsidiary in the country to sell food products, which are to be produced and/or manufactured in India, by way of opening retails outlets or online.

The Government had got investment proposals for retail of food products from three firms - Amazon, Big Basket and Grofers - worth around $695 million.

Amazon is the Seattle-based retail giant and is one of the major e-commerce companies in India, while Big Basket and Grofers are into space of online grocery. The American major had proposed an investment of around $500 million in food products retail.

During April-December 2016-17 period, India’s food processing sector received FDI worth $663.23 million.

Last month, the Cabinet had decided to abolish the FIPB, a 25-year-old body, which had been examining the FDI proposals that require government’s approval, to expedite the process of clearance. Under the new process, FDI proposals with regards to retail sector is being cleared by the Ministry of Commerce and Industry.