Budget 2016: India To Allow 100 Percent Foreign Investment In Processed Food Sector

In a move that could encourage foreign retailers to set up processed food manufacturing in the country, India has allowed 100 percent foreign investment in the retail sector. The announcement was made during the budget proposal address by Finance Minister Arun Jaitley on Monday. The move was championed by Harsimrat Kaur Badal, Minister of Food Processing Industries, and was pushed to ensure investment from foreign retailers in the infrastructure, employment and as well as to provide revenue for the local farmers. 

Investing in Infrastructure

Speaking about the 100 percent FDI in the retail sector, Badal said, “I have requested the prime minister that 100 percent FDI in multi-brand retail of those food products produced and processed in India should be allowed so that big companies can create infrastructure especially for agriculture and bring the latest technology for the farm sector.” Badal also noted that the move could provide several benefits to the consumers by “reducing inflation, reduce wastage, increase availability of fresh and processed variety of food at a stable price.” 


FDI to Change The Processed Food Sector

Currently, India allows up to 51 percent of foreign direct investment but it comes with several additions such as $100 million in upfront investment and 30 percent mandatory local sourcing. The new ruling will encourage foreign retailers such as Walmart, IKEA and Marks & Spencer to setup their own food products without restriction, as long as the products are manufactured in the country. In 2012, Foreign Investment Promotional Board (FIPB) declined IKEA’s proposal to setup its renowned cafes inside its stores in the country but gave permission later on with a mandate that the cafe can only be part of the store for consumers who are in the store.