A boost for the retailers and grocery startups such as Bigbasket and Grofers, come up as the government on Monday allowed 100% FDI in food retail, including through e-commerce, provided such 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 here closely and perhaps even foray into B2C (Business-to-Consumers) food retail. Currently, the US giant operates a B2B business in India since FDI in multi-brand retail is not allowed.
The US retailer has built a strong backend infrastructure in food. Similarly, the move will also help Indian hyper-local grocery startups raise funds more easily.
"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 e-commerce, is very progressive and will help in reducing wastage, helping farm diversification and encourage industry to produce locally within the country," said a Walmart India spokesperson.
The decision comes without any riders, department of industrial policy and promotion secretary Ramesh Abhishek said. The food processing ministry wanted the food retailers to mandatorily invest in back-end infrastructure besides being allowed to sell some non-food goods.
"This initiative (FDI in food retail) could bring in investments in food infrastructure by global players and provide a platform to sell those products manufactured in India, thus opening up the domestic food market," said Sreedhar Prasad, partner-e-commerce, KPMG in India.