D`Souza & Raghavendra Kamath, Business Standard
December 13, 2011
After the UPA regimes move to suspend its decision on foreign
direct investment (FDI) in multi-brand retail, the industry is
turning nervous about the prospects of single-brand retail as
well. More so, since the government has yet to notify a Cabinet
decision raising the foreign investment level to 100 per cent,
from the current 51 per cent, for single-brand retail.
It was on November 24 that a Cabinet meeting gave its nod to
both moves. After that, the Centre, on December 8, formally put
on hold its decision to allow up to 51 per cent FDI in multi-brand
retail, succumbing to mounting pressure from its allies and Opposition
parties. True, an announcement followed that there was no suspension
on the decision on single-brand retail. Yet, with the government
coming under attack from the Opposition parties on several issues,
the industry is now fearing a delay in the notification of the
pertinent decision. UK-based fashion retailer French Connection
says it has not yet sensed a clear direction over the approval
of the FDI in single-brand retail. There is a huge debate
and uproar on FDI in multi brand, but no one seems to talk about
single-brand, notes Nidhi Dua, the firms country manager.
The national body of retailers has taken a wait-and-watch policy.
Says Kumar Rajagopalan, chief executive officer of Retailers Association
of India: Until the notification is out, our fingers are
Third Eyesight, which works with national and international
retailers, says many of these chains are frozen with
regard to their plans. This is because of uncertainty on
the policy front, notes Devangshu Dutta, chief executive
of the retail consultancy. Only if there is clarity can
you take an appropriate route. Here, you are stuck in a limbo;
its unproductive for everyone, he adds. There
must be political clarity on this.
Swarovski India also notes there is no clarity from the government
at the moment. It is a little too premature to pre-empt,
notes Sukanya Dutta Roy, its director (consumer goods business).
We all hope that FDI in single-brand retail passes through.
Prominent among the firms keen on India entry are Sweden-based
home products company Ikea, US-based GAP, UKs Arcadia group
and Italys Prada. Those already having a presence in this
country include the UKs Marks & Spencer and Spains
Technopak Advisors says the government, in a larger sense, is
not taking any decision on any front. Why would any investor
want to invest in a country where economic, political and policy
matters are going from bad to worse? asks Arvind Singhal,
chairman of management consultancy.
However, the government seems confident about pushing the changes
in single-brand FDI norms. The decision remains; it has
been approved by the Cabinet, says a senior official. There
is no change on that front. We are in the process of notifying
the rules soon. I dont see this going anywhere.
As for the policy riders, the condition of 30 per cent sourcing
from the small-scale sector will kick in the moment foreign equity
exceeds 51 per cent in single-brand retail. But a senior executive
from management consultancy says the government can make the conditions
even more stringent to pacify the critics of retail FDI.
With inputs from Nayanima Basu
on FDI in Retail -- More Heat than Light")