‘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

The Economic Times - - Economy - RA­SUL BAILAY

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.

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