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Thursday 24 November 2011

Retail FDI: The big bucks may not pour in, for now

Existing partnerships between Indian and foreign retailers won't be affected
Retailers and analysts, who had given up on Indian doors opening to FDI in multi-brand retail as a distant dream, have welcomed the move. They are not, however, certain whether the Government nod will actually bring in the ‘expected' billions of dollars into the country's retail sector.
“Given the turmoil in the global economy and on the domestic front too, things looking hazy, I doubt if any new retailers will enter the country. Global retailers who have already partnered with local partners may commit more capital in the country, but I don't see huge inflows into the country,” says Mr Arvind Singhal, Chairman of consulting firm, Technopak Advisors.
According to Mr Bijou Kurien, President and CEO, Lifestyle, at Reliance Retail, the mandatory investment of $100 million should not be a limiting factor for international players. “This move is imperative for growing the industry in this country,” he said. Mr Thomas Varghese, Chairman, CII National Committee on Retail, says India would provide a new area for expansion for retailers who are struggling in their own markets. “Retailing is at a nascent stage here and there will be growth in 30-40 years. 51 per cent FDI should not pose a problem for international players.” For domestic retailers, this will open up FIIs and strategic investments, which in turn would enable domestic retailers to dilute equity.
Industry players unanimously quashed concerns of job losses that FDI could result in as expressed by some political parties. “It (job loss) never happened when a Reliance or a Lifestyle opened stores, why will it happen now,” asks Mr Singhal. On the other hand, points out Mr Thomas, this will mean more jobs for Indians. For consumers, of course, the most benefitted category, modern retail has proven to bring down prices and beat inflation, which is much needed today.
Mr Singhal also says the issue of foreign retailers dumping their country's products does not hold good here. “Indian retailers or foreign retailers can import the same products and are all governed by import duties,” he points out.
He also does not see existing partnerships between Indian and foreign retailers like the Bharti-Wal-Mart breaking up. “This has not happened for convenience. There must be genuine reasons for the partnership. No Indian retailer would want to be just ‘door openers' for a foreign player. Maybe after 10 years, one partner will buy out the other.”

Immediate impact

Ms Saloni Nangia, Senior Vice-President, Retail, at Technopak Advisors, says, “Don't expect an immediate impact. The impact will come only in a 2-3 years time, in terms of what kind of investments come in, on inflation. Both from industry perspective as well as consumer perspective the changes will not be overnight, but will take time.”
  According to her, the foreign retailers will need to invest in the food processing chain, supply chain and so on, besides which there are so many riders. “All these need execution and implementation, so it will take time,” she says. 

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