Govt allows 100pc FDI in grocery startups like Bigbasket & Grofers

Giving a much-needed boost to retailers and grocery startups such as Bigbasket and Grofers, the government has allowed 100 percent FDI in food retail, including through e-commerce, provided such items are produced, processed or manufactured in the country.

This new policy will allow multi-brand retail giants such as Walmart to look at their food business here closely and perhaps even foray into B2C food retail. Currently, the US giant operates a B2B business in the country since FDI in multi-brand retail is not allowed. The move will also aid Indian hyper-local grocery startups to raise funds more easily.

"The decision by the government to allow up to 100 percent foreign direct investment (FDI) through FIPB in the 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. This far-reaching reform will benefit farmers, give impetus to food processing industry and create vast employment opportunities. We will study the policy document when government finalises and issues it," said a Walmart India spokesperson.

Ramesh Abhishek, secretary, department of industrial policy and promotion said that the decision comes without any riders. The food processing ministry wanted the food retailers to mandatorily invest in back-end infrastructure besides being allowed to sell some non-food goods.

But there is a catch for grocery startups as government’s move allows FDI in only retailing of food products, while most grocery startups sell household items such as soap and incense sticks apart from food. There are in fact chances that we might soon see separate food businesses hive from the existing ones.

"It is a possibility, although, at present, food accounts for around 70 percent of our business," said Hari Menon, co-founder CEO, Bigbasket. "If we manage to separate our food business from the rest of our portfolio, it will allow us to raise funds easily from foreign players," he added.