Planet Retail 5 May 2008

Reports in The Indian Express suggest that the Indian government has decided to issue a fresh set of guidelines aimed at governing wholesale trading under the Foreign Direct Investment (FDI) policy, in order to clamp down on misuse of the current policy. According to ministry officials, "it was essential to come up with detailed guidelines on wholesale trading permitted under the current FDI policy. These guidelines will have built-in checks and measures to prevent misuse of the current policy." Refusing to share details, the source added that the guidelines were awaiting internal clearance and were likely to be announced within a month.

The new guidelines "could include a penalty mechanism, stringent norms for customer registration and verification, and minimum purchase criteria. They could also state merchandising categories and compliance information. These guidelines will be informative as well provide guidance to the new businesses," said an industry source. The government had earlier stipulated that wholesale trade under FDI policy can be conducted only for business-to-business (B2B) purposes and not for retail customers. 

FDI is currently allowed in cash & carry wholesale trading up to 100%. However, up until now, just two major foreign retailers have set up cash & carries in India. At the same time, Wal-Mart, Carrefour and Tesco have already announced their intention of setting up wholesale stores in India.

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