Will India open its door to foreign retailers?
By Kukil Bora, SiliconIndia   |   Friday, 22 October 2010, 12:10 IST   |    2 Comments
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Will India open its door to foreign retailers?
Bangalore: It was in July this year when the department of industrial policy & promotion (DIPP) came up with a discussion paper on retail to get feedback from stakeholders on opening up multi-brand retail trade in India. Although the final decision will depend on the Union Cabinets approval at the highest level, the feedbacks to DIPP's proposal indicate a distinct division among stakeholders. While domestic and foreign retailers stand by opening up of the segment, farmers, shopkeepers and sundry retailers are against the move. Now, it's up to the Union Cabinet. Will it show a green card or will the proposal continue to be on the back burner? Before going into the pros and cons of the issue, let's discuss why India is seen as 'promised land' for the world's retailers. Although India is on China's tail right now, the scenario is not going to be the same for long. Due to India's thriving economy and increasing incomes, foreign retailers see huge growth prospective in India's retail sector, which is expected to grow to $427 billion by end of 2010 and $635 billion by 2015. According to current government policy, India allows 51 percent foreign direct investment (FDI) in single-brand retail and 100 percent FDI in wholesale trading. Whether further liberalization of FDI should occur in the retail sector, this is where the current debate centers. What will opening up of retail to FDI bring? Well, it will provide Indian retailers with an opportunity to attract foreign investment, a reason for which both DIPP and the consumer affairs department favoured FDI in retail in the past, but political opposition interdict their recommendations. Global retailers like Walmart and Carrefour, and lobbies like the U.S.-India Business Council, Confederation of Indian Industry and the Federation of Indian Chambers of Commerce and Industry support the move and are of the opinion that foreign investment of up to 51 percent should be allowed in multi-brand retailing. "FDI in multi-brand retail should absolutely be permitted, and ideally without any restrictions," said Raj Jain, President, Walmart India. In order to operate cash-and-carry wholesale stores, Walmart has tied up with the Bharti group and it intends to extend the partnership to multi-brand retail. Carrefour said FDI would be a help for consumers, suppliers and farmers. It would "help in controlling inflation by offering more competitive and rationalized prices of products to consumers and reduction of wastage across India's farm-to-fork supply chain," said Jean Noel Bironneau, managing director, Carrefour WC&C India. But those who are opposing the move believe that once FDI comes in retail, hawkers, small stores and sundry retailers in the unorganized sector would be thrown out of business. According to them, it would risk the livelihood of about four crore people directly engaged in retailing food and non-food items, and the 20 crore people dependent on them. Organizations like Kisan Jagriti Manch and Bhartiya Majdoor Sangh said that small scale manufacturers and farmers would be forced to sell their products at cheaper and uneconomic prices dictated by the multinational corporations if the move is approved. The debate over the issue is getting stronger and with U.S. President Barack Obama's visit to India next month, it is likely to gain even more significance as he is expected to raise the issue in favour of foreign investment in multi-brand retail.

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