After months of political gridlock, the Government decision to go ahead with allowing up to 51 per cent foreign direct investment (FDI) in multi-brand retail got a thumbs-up from the organised retail sector and sparked protests from small traders.
Big-box retailers, though, are still uncertain on the implementation due to the riders attached to the clearance, including State level clearances. Small traders fear job loss and predatory pricing by multinational companies.
Players like Walmart, RP-SG owned Spencer’s hailed the move as a major economic reform.
Sanjiv Goenka, Chairman RP-SG, Group, said this is a strong message from the Government to carry forward the agenda of reforms.
Walmart’s CEO and Managing Director, Raj Jain, said, “This policy change will allow us to connect directly with the consumer and save them money. By being ‘stores of the community’, we will also help them live better. We are willing and able to invest in back-end infrastructure that will help reduce wastage of farm produce, improve the livelihood of farmers, lower prices of products and ease supply-side inflation.”
The Union Cabinet had decided on November 24, 2011 to allow 51 per cent FDI in multi-brand retail, but the same could not be implemented in the face of strong opposition from UPA-ally Trinamool Congress and several State governments.
The Government’s move to open up the sector comes weeks after global rating agency Fitch Ratings had revised the second half 2012 outlook for the domestic retail sector to negative from stable. Also the US Government had on several occasions lobbied for opening up of the retail trade.
India’s retail sector is estimated at $600 billion with organised retail accounting for less than 14-15 per cent.
Praveen Khandelwal, Secretary General, Confederation of All India Traders, termed the move as unfortunate saying, “The Government has allowed multinational corporations to dominate and control the retail trade.”
Asked if implementation will be speedy, Arvind Singhal, Chairman, Technopak, said the current riders are not disabling and implementation will happen unlike previous times.
The real estate sector is positive that the sector will get a shot in the arm.
Sanjay Dutt, Executive Managing Director, South Asia, Cushman & Wakefield, said, “Within the next 12-24 months, international retailers will accelerate their entry strategy.”