Retail FDI must factor in local issues: Nagesh

| Updated on: Nov 21, 2011

The Government move to open up the retail sector with 51 per cent foreign direct investment would attract many large global players but the change would only be felt in the long term, over the next four-five years, as it is extremely capital intensive, according to Mr B.S. Nagesh, a retail industry veteran.

“This is being tracked globally as companies are keen to play a role in the country's retail industry growth, which is pegged at $590 billion. The real impact of investments, when they come in, would only be felt in the long term,” he said.

Speaking to Business Line , Mr Nagesh, now non-executive Vice-Chairman of Hypercity Retail, said the policy creates enough excitement for multi-brand retail but some provisions to invest in the supply chain is ok for hypermarkets and supermarkets, but does not augur well for others.

Large multi-brand players such as Wal-Mart and Tesco have made their entry; it would also be good for a single brand Ikea too, he felt.

“As someone who has been loosely interacting with the retail industry for the past three decades, the policy, I feel, would need fine-tuning, factoring in some local issues to make it effective, just as it has been done in other sectors. Retail is a low-margin and an investment intensive sector. It employs over 33 million people. Conservatively, it is expected to grow by about 6 per cent. It requires funds and FDI to meet that need,” he said.

One of the concerns about opening up the retail sector is that it would potentially impact small neighbourhood stores.

This is unlikely as these stores are built into the system and are a part of people's lives. Nothing would take them away, he said.

“Given the nature of large metros, it would be hard to directly acquire a store of the size of 30,000 sq.ft to 50,000 sq.ft. It is simply not possible today as cities do not have that much vacant space. Therefore, the best way out is to take a local partner,” he felt.

Published on March 12, 2018

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