Of FDI in retail

While consumers can look forward to more choices from an entire host of retail chains that are expected to enter the Indian market, the industry will be able to fund large scale expansions when retail is finally opened up to FDI. These prospects became brighter as a result of the committee of secretaries recommending 51% FDI in multibrand retail formats. Apart from opening up doors for the likes of Wal-Mart and Carrefour, which have been waiting in the wings for years, it would eventually also benefit small and marginalized farmers as well, industry experts said. According to Thomas Varghese, chairman, CII National Retail Committee and CEO, Aditya Birla Retail, “The move will bring in the required funds from all kinds of foreign investors into modern retail which was till date stymied for funds.” Varghese said that once the funds come into India through the FDI route, it will usher in a phase of expansions. Once cleared, the move would offer Indian companies the option of selling a part of their stake to foreign companies enabling them to become debtfree. “For us as a company, the option to sell a stake comes into play in order to make ourselves debt-free. The FDI will throw open opportunities which will enable us to sell a stake and raise funds,” said Kishore Biyani, chairman, Future Group, India’s largest retailer which operates stores like Big Bazaar and Food Bazaar. “For us, categories like home, electronics will gain immensely if we bring in a partner. The industry has the potential and, with the opening up of the sector, can grow faster,” said Biyani, who hoped that closure on the much-awaited policy change was just a step away. “This has been ongoing for the last four years so I am not surprised. But now we are more positive that this will be a reality soon. As far as the opening of multi-brand retail goes, we as a retailer think it will speed up the business prospects of the overall industry,” said Biyani.
RETAIL ROADMAP
Decision : Panel of secretaries approves 51% FDI in multi-brand retail
What Next? : Plan will go to the Cabinet for final nod
Risks : Opposition from small shop owners. Some political parties also oppose move. Retailers could have difficulties in finding and training talent
In Queue : Walmart, world’s largest retailer, already in JV with Bharti Enterprises. Carrefour, French hypermarket chain, opened wholesale outlet in 2010. Tesco, global general merchandise retailer, has a presence in India, Metro AG, Germany’s biggest retailer, first overseas retailer to open wholesale store in 2003
Opportunities : Current retail market about $28bn (Rs 1.26 lakh crore). Estimated to grow to $260 billion by 2020. May help farmers get higher remuneration, has potential to add 3-4 million new jobs. Consumers could save 5-10%. Govt revenues could go up