The Wall Street Journal reported on Saturday that the Indian government may be taking steps toward opening up multibrand retailing to foreign direct investment. It will be very interesting to see how this story unfolds in the coming days and weeks.
One potentially troubling aspect of the government's plans is a reported requirement that investments equal or exceed $100 million, with at least half of that value being devoted to developing "back-end infrastructure." Such a condition could impose an unnecessary and artificial burden on potential investing firms. Infrastructure is certain to be an important part of their investments in any event, but it may not make sense for infrastructure to account for 50 percent or more of their investments in every circumstance. Imposing such a requirement could lead to suboptimal outcomes for individual investors and the sector as a whole.