Government Allows 100% FDI In Food Retail

Earlier this week, the Indian Government permitted 100% FDI in food retail, including retail through ecommerce.

The move was made in a bid to strengthen the sector, provided these items are produced, processed or manufactured in the country.

This will allow multi-brand retail giants such as Walmart to look at their food business, in India, closely and perhaps even foray into B2C food retail.  Also, it will help Indian hyperlocal grocery startups, like Grofers and BigBasket etc. raise funds easily.

A Walmart India spokesperson, told ET, “The decision by the government to allow up to 100% foreign direct investment (FDI) through FIPB in marketing of food products produced or manufactured in India, including through ecommerce, is very progressive and will help in reducing wastage, helping farm diversification and encourage industry to produce locally within the country. This far-reaching reform will benefit farmers, give impetus to food processing industry and create vast employment opportunities. We will study the policy document when government finalises and issues it.”

The government expects the new policy to curb food wastage. Food processing minister Harsimrat Kaur Badal has been rooting for FDI in the sector citing heavy food wastage. She said India has been wasting food and agricultural produce worth INR 92,000 Cr and foreign funds can build infrastructure at farm gate level for benefit of farmers.

Majorly the move will help the hyperlocal players to expand rapidly in tier-II and tier III cities as last mile connectivity and high fulfillment costs can be met by the new inflow of capital.

Saurabh Kumar, co-founder of Grofers said, “We welcome the decision as it will benefit the domestic food industry & help improve the essential supply chain – something that is needed to ensure future food security for the country. However, we are awaiting clear guidelines on this before we can comment further.”

The government’s move allows FDI in only retailing of food products, while most grocery startups sell household items such soap and incense sticks apart from food. So in order to avail benefit of the policy, they will have to manage to separate the food business from the remaining portfolio to raise additional funds.

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