Amazon gets govt nod for $500-million FDI in food business

In a move that is expected to attract top dollar, the government on Monday allowed Seattle-headquartered online giant Amazon to open fully-owned brick-and-mortar stores to sell food products in India. This is the first foreign direct investment (FDI) proposal for setting up “food-only” retail outlets that the government has permitted. It also happens to be the first FDI case to get an in-principle clearance after the Foreign Investment Promotion Board (FIPB) was shut down recently.

In its January application to the Department of Industrial Policy & Promotion (DIPP), the American major had proposed to invest $515 million in food retail over the next five years. Indian online grocery stores Grofers and Big Basket could be the next to get a go-ahead for setting up food outlets, making it a total of $695 million for the three players.

“After much discussion, we have decided to give approval to Amazon’s investment proposal,” said a senior DIPP official. An Amazon India spokesperson confirmed that the company had received government approval for food retail.

In June last year, the government allowed 100 per cent FDI in multi-brand food retail. However, the food products have to be produced, processed or manufactured in the country. The move till now had drawn little interest from international retail players who had complained that just having “food-only” stores was not a viable option. While 51 per cent FDI was allowed in multi-brand retail under the United Progressive Alliance rule, the current National Democratic Alliance government is opposed to it, though the rules have not been altered.

There have also been delays in companies getting approval. After dissolving the FIPB, the decision on who would approve FDI proposals in its absence delayed the process. Now, administrative ministries are learnt to be fast-tracking the process.

Many companies have already selected space for stores and worked out the number of employees they would need. “The blueprint for our offline plan is ready; our back-end is in place,” a senior executive at an online company planning to open physical stores said.