‘Hope BJP Will Not Scrap Retail FDI’ Retailers say reversal in multi-brand FDI policy will dent Modi’s image and send negative signals about India’s biz environment
Domestic and foreign retailers are hoping that a pro-business BJP-led government will not altogether shun foreign investment in multi-brand retail, despite the winning party’s election manifesto saying it will do so. The Bharatiya Janata Party (BJP), which won a landslide victory in the Lok Sabha elections last week, has welcomed foreign direct investment (FDI), but not in retail. India had allowed FDI in multi-brand retail in 2012 with stiff riders. Retailers say that any announcement of reversal of FDI policy will not only send a strong negative signal about the business environment in India, but also dent Prime Minister designate Narendra Modi’s image of a pro-reforms leader. Kishore Biyani, chief executive of Future Group, one of India’s largest retail conglomerates, said he was hopeful that the new government would look at the merits and demerits of the existing policy. He said it may work around the existing multi-brand retail policy that allows foreign supermarkets to own up to 51% stake in a local venture, albeit with some stiff riders. “We will have to redefine the current policy. This is a very tricky policy, as there is no word called multibrand retail anywhere in the world,” Biyani told ET. “One has to look into the (existing) policy and understand a fresh perspective, and wherever there are issues with it, they should (rectify) those issues rather than blocking them.” Biyani is not the only one wishing for policy easing. “The feeling is that the PM-elect is business minded and has come to power to make some positive changes. He cannot start his tenure by scrapping it,” a senior executive of a foreign retailer, who did not wish to be named, said. The executive pointed out that Modi has pledged to create jobs in India and that foreign investments in retail will help achieve that. “Rather than scrapping, they will see what is not working (with the current policy) and why investment has not come. From that perspective, they will make sure it is executed well. For that, they will try to remove the hurdles,” he added. Another top executive of an Indian firm was of the view that a BJP-led government would continue to allow FDI in retail, but in the next 12-24 months, would scale down foreign holding in such JVs to 49%, from 51% at present, so as give Indians control in such partnerships. After India allowed foreign supermarket operators to own up to 51% stake in local ventures in 2012, Britain’s Tesco has been the only foreign retailer to have applied and received a nod to set up shop. Last December, the UPA government ap-
After intense opposition , UPA govt opened the multi-brand retail for foreign investment in 2012
proved Tesco’s application to invest about $110 million in a 50:50 joint venture with Tata Group’s Trent Hypermarkets. Although Tesco is yet to make the investment in Trent, a person familiar with the company’s plans said the process is on. If Tesco brings in capital before the new government takes a call on FDI in multi-brand retail, it will be hard for the government to reverse it, as any such move will invite the Bilateral Investment Promotion and Protection Agreement that India has signed with more than 70 countries, including the UK, where Tesco is based. Besides, Modi has a good working equation with the Tata Group — as chief minister of Gujarat, he had invited Tata Motors to set up a plant in the state when the carmaker was forced to pull out from Singur, West Bengal, due to political outcry against its Nano car project. A spokesperson for Tesco declined to comment. After intense opposition from parties including the BJP, the Congressled UPA government finally opened the multi-brand retail for foreign investment in 2012, but such invest- ment comes with stiff riders, including $100 million upfront investment, half of which must go into building a greenfield supply chain and allied infrastructure.
Last week, Walmart India’s chief executive said the company is seeking to engage with the new government as it is committed to longterm investments in the country. “As India elects a new and stable government at the Centre, we’ll continue to remain engaged, committed and work together with the government and other stakeholders and continue adding value to the economic growth in the country,” , Krish Iyer said in a statement on Saturday. “We continue to believe in the important value Walmart brings to India, including social and environmental benefits. The country continues to be an exciting place for investment and is a vibrant democracy as proven again by the recent elections.”
In October, Walmart had split with its Indian partner, Bharti Enterprises, to go solo with a cash-and-carry retailing venture. The US-based retailer plans to add 50 wholesale stores in India over the next four to five years. Currently, Walmart operates 20 Best Price branded outlets in various cities.
“We’re committed to India and are pleased with our established and successful cash-and-carry business and anticipate substantially growing that business,” Iyer said.