New Delhi: In a major decision, the government on Thursday approved 51 percent FDI in multi-brand retail paving the way for global giants like WalMart to open mega stores in cities with population of over one million.

The nod from the Union Cabinet came in spite of opposition from key ally Trinamool Congress (TC) at a meeting chaired by Prime Minister Manmohan Singh, who was strongly in favour of the move.

Railway Minister Dinesh Trivedi (TC) registered his opposition and was told by Commerce and Industry Minister Anand Sharma that he has discussed the issue with his party chief and West Bengal Chief Minister Mamata Banerjee.

Sources said that Finance Minister Pranab Mukherjee supported the proposal saying it would strengthen the rural infrastructure.

Today's decision was interpreted as a major signal from the government of its intention to go ahead with key reforms negating an image of policy paralysis.

The decision will be a game-changer for the estimated USD 590 billion (Rs 29.50 lakh crore) retail market dominated by neighbour-hood stores.

Industry, domestic and global players, welcomed the government decision.

The Cabinet also decided to remove the 51 percent cap on FDI in single brand format under which companies in food, lifestyle and sports business run stores, sources said.

Owners of brands like Adidas, Gucci, Hermes, LVMH and Costa Coffee can have full ownership of business in India.
In the wake of apprehensions that the decision would impact farmers and kirana shops, tough riders have been imposed on the entry of multi-national companies in 53 cities with population of over one million.

Industry welcomes FDI in multi-brand retail

India Inc hailed the government's decision to allow 51 percent FDI in multi-brand retail while completely opening single-brand retail to overseas investors, saying the move would help bring in the much needed capital for the sector.

"It is a win-win situation for everyone. With the amount of money to be invested in back-end, supply chain and farm sector will benefit," Future Group Chief Executive Officer Kishore Biyani said.

Even the small and medium enterprises will benefit. Eventually consumers will get a lot of choices and they will get products at better prices, he added.

Shoppers Stop Vice Chairman B S Nagesh said: "I welcome FDI in retail. Capital is required for the market whether it comes from domestic or foreign investors, it will help grow the sector in the next 3-5 years."

Commenting on the impact of opening the sector to foreign players he said: "There will be no impact on the domestic industry as there is enough market. At the end of the day the consumer will benefit."

Sharing similar view, industry body CII said it strongly supports the introduction of FDI in multi-brand retail as it would benefit consumers, producers (farmers), small and medium enterprises and generate significant employment.