Areas of Concerns
In spite of the high growth in the past decade and optimistic projections, in recent years there have been some areas of concerns. The GDP growth rate has slowed down and the retail growth has also slowed down. AT Kearney in its market attractiveness index for global retailers have downgraded India significantly as an attractive retail destination. In 2011, India was ranked fourth worldwide (after Brazil, Uruguay and Chile) and first among emerging Asian markets as an attractive destination for foreign retailers. However, in 2013, India slipped to the 14th position while other developing countries such as Brazil and China continued to be in the topmost destinations. The slowdown in the economic growth in the past two years and the slow pace of retail liberalisation in India may have adversely affected the attractiveness of India’s retail sector.
The government has opened up the retail sector in a phased manner, but it has not been successful in attracting FDI. The FDI inflow into this sector is low and shows a fluctuating trend. The FDI inflow in retail gradually increased after the liberalisation of the single brand retail policy in 2006 and reached a peak in December 2010 ($229.1 million). It thereafter declined sharply. By June 2012 retail FDI declined to $42.7 million with a share of only 0.02 per cent in total FDI inflows into India and stayed at that level till February 2013. In March 2013, FDI in retail revived to $95.36 million with a share of 0.05 per cent in total FDI into India. During the last two years, the government has issued several notifications on FDI liberalisation in the retail sector - both for single and multi-brand retail, but the restrictiveness of the conditions associated with the FDI liberalisation has made the policy unattractive. Specifically, foreign retailers have raised objections to mandatory back-end investment requirements, restrictive conditions of sourcing from SME and restrictions on e-retailing. Till date, none of the global multi-brand retailers have invested in India after the 2012 liberalisation of the multibrand retail policy.