The government is moving swiftly to build a consensus over the move to allow foreign investment in the multi-brand retail sector, with the commerce, industry and textiles minister Anand Sharma writing to the chief ministers (CMs) of the three key states of Uttar Pradesh, Punjab and Odisha to seek their support. Sharma has been trying to build a consensus, and has met several CMs to draw their support to the move. Some CMs have backed the move to open up the multi-brand retail sector that has emerged as a test case for moving ahead with economic reforms.
“I hope that being a CM who is known for his progressive outlook and global vision, you will recognize intrinsic merit of this policy and give your support and understanding in the matter,” Sharma said in his letter to Odisha CM Naveen Patnaik, UP CM Akhilesh Yadav and Punjab CM Prakash Singh Badal. “I look forward to your personal support in the rollout of this policy for the larger public good,” the minister said.
He said the government had taken a conscious decision of leaving the implementation to the states and the FDI policy cleared by the Cabinet will be an overarching enabling policy framework and the state governments will be free to take appropriate decision on its rollout.
Sharma, who is in Russia for a bilateral meeting, also told businessmen that the government expects consensus to emerge over the move to open up the multi-brand retail sector to foreign companies in the coming weeks, a move which is expected to shore up investor sentiment and offer fresh business opportunities.
The minister also met Olaf Koch, CEO and chairman of the management board of METRO, a top global retail firm. Koch detailed the firm’s expansion plans in India. He said the company will raise the number of their stores from 10 to 16 in the country. The UPA government was forced to put the decision to allow 51% foreign equity in the multi-brand retail sector after stiff opposition from some of its allies and a few state governments. The issue of opening up the sector to foreign retailers such as Wal-Mart, Carrefour and Tesco has been debated for more than a decade but had made limited progress due to the strong opposition from traders, political groups and the government’s allies.
The waning influence of the Trinamool Congress, which is seen as the stumbling block to the opening up of the sector, in the run up to the presidential poll has revived hopes that the government may be able to finally implement the decision.
Sharma, in his letter to the CMs of non-BJP ruled states, outlined the benefits of opening up the multi-brand retail sector for the economy. “Opening up FDI in multi-brand retail will bring in much needed investments, technologies and efficiencies to unlock the true potential of the agricultural value chain,” Sharma said in his letter. “The Indian consumer will undoubtedly gain significantly from this step as they will be afforded much greater choice, better quality and lower prices,” he added.
India has been ranked the fifth most attractive destination for retail investment among 30 emerging markets because of rising disposable incomes and rapid urbanization. Even though its ranking slipped from the fourth spot in 2011, India has been placed ahead of the UAE, Saudi Arabia, Indonesia and Russia.
“India (5th) remains a high-potential market with accelerated retail market growth of 15 to 20 per cent expected over the next five years, supported by GDP growth of 6-7%, rising disposable income, and rapid urbanization,” US-based global management consulting firm A T Kearney.
Changes in FDI regulations were a major story in India last year. The changing FDI climate has provided an interesting dynamic to several international retailers' entry and expansion plans for India, it added. According to the entity’s Global Retail Development Index (GRDI) 2012, Brazil is the most alluring market for investment in the retail sector, followed by Chile (second), China (third), Uruguay (fourth) and India (fifth).
Noting that Europe faced another year of economic turmoil in 2011, developing countries forged full speed ahead.“With consumer confidence improving and spending increasing, global retailers continued their expansion in to these markets. In the past five years, US-based Wal-Mart, France-based Carrefour, UK-based Tesco and Germany based Metro Group saw revenues in developing countries grow 2.5 times faster than revenues in their home markets,” the report said.