Only Bangalore will benefit from foreign multi-brand retail

There will be no rush of foreign multi-brand retail into Karnataka, given that the Central government is yet to receive a single application from such retailers. Some had expected global players like Walmart, Tesco and Carrefour to quickly take advantage of the Centre's policy announced late last year. That has not happened.

Part of the reason for that is the stringent conditions laid down by the government. These include a minimum investment of $100 million, of which 50% needs to be in backend infrastructure; 30% of products must be sourced from small enterprises; and retail outlets can be set up only in cities with a population of over 1 million. In Karnataka, the last condition implies that they can establish outlets only in Bangalore, because that's the only city in the state with an over 1 million population. 

Foreign retailers have also been waiting for some clarifications on the conditions imposed by the government, and some recent clarifications may have only dampened the enthusiasm of these retailers. 

The government has said that the minimum investment must be in fresh assets, and not in acquisition of existing assets. That means the retailers have to establish new retail stores, as also create new backend infrastructure. It has also said that sourcing for global operations cannot be counted in the 30% that is sourced from small businesses, and that fresh products (fruits, vegetables, meats) too cannot be counted in that category.