The central Govt. has cleared the way to operationalise 51 percent FDI in multi-brand retail but left it to the state governments to allow setting up of such stores.
It has also tweaked the sourcing norms for FDI exceeding 50 percent in single brand retail, requiring foreign firms, which want a relaxation of the 30 percent procurement norms, to set up manufacturing facilities in the country.
 
Foreign retailers planning to enter the multi-brand segment would have to invest a minimum of USD 100 million with 50 percent of it in rural areas. The firms will also have to source 30 percent of their products from Micro and Small & Medium Enterprises where FDI is 51 percent and above.
 
Under the norms, 50 percent of total investment will have to be invested in 'backend infrastructure' within three years of the induction of FDI.
 
As far as the urban areas are concerned, they will be allowed to open stores only in cities with a population of more than one million, while in the case of hilly states, it will be up to the respective state governments.
 
For single brand, any firm seeking waiver of the mandatory 30 percent local sourcing norms would have to set up a manufacturing facility in the country. This will help, in particular, foreign watch makers and textile manufacturers who want to enter India on their own.
 
The decision paves way for global retail giants WalMart, Carrefour and Tesco to open retail stores in India under their own brands. At present WalMart has a 50:50 cash and carry joint venture with Bharti Group, while Carrefour runs wholesale stores. Tesco, on the other hand, has a tie-up with the Tata group and supports the Indian firm in the running of Star Bazaar chain of retail outlets.