Bangalore: Indian retail sector will see gloomy days this year for a short period of time, states a Deloitte Touche Tohmatsu and Stores Media report.

The Indian government had already given the green signal for 100 percent Foreign Direct Investment (FDI) in Wholesale Cash and Carry Trading and Single Brand Product Retailing. However, absence of 51 percent FDI in Multi Brand Product Retailing seems to limit India’s growth, states Deloitte. Deloitte sees FDI in Multi Brand Product Retailing as a hidden opportunity for India to improve its economic status in the long-run. The report states so because FDI in Multi Brand Product Retailing in India will benefit retailers from across the globe. It quotes, “as they continue to seek global opportunities beyond the Chinese market.”

The “planned liberalization” outlook of the Indian government took a back seat last year, when the Union Cabinet decided not to pass the bill for FDI in Multi Brand Product Retailing. It is not clear whether this proposal will be offered again. 51 percent FDI in Multi Brand Product Retailing saw huge and bitter criticism from various Indian political parties. This uproar was due to their concern about small Indian retailers, who would suffer if big multi-national retailers would penetrate the Indian retail segment.

Deloitte says “trade is a modest share of GDP” and “India’s financial sector is not highly exposed to the troubles in European credit markets.” It sees India is being relatively cushioned from the global economic turmoil, despite our reduced growth. It also ranks India among the top 250 retailers of the globe, based on their incomes. This might be the reason why big retailers are so keen to enter the Indian retail market. The depreciating value of the rupee can be another reason for this trend as MNCs will end up paying less for their investments.

As no situation is devoid of a downside, the Indian retail sector is no exception. Despite the growing customer base, both in urban and rural India, there are a few road-blocks for the entry of retail giants in our country. Deloitte quotes, “These include a high degree of trade protection, continuing regulation of labour markets and uncertainty regarding the future of policy.”

The Indian government needs to review its policy on 51 percent FDI in Multi Brand Retailing and give a balanced decision, keeping it in the favour of both, Indian retailers and the foreign multi-nationals.