Big domestic retail offers no comment on multibrand FDI

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India Inc, generally buoyant over the prospect of a BJP victory in the national elections, squirmed on Monday after the saffron party vowed to resist foreign direct investment (FDI) in multibrand retail, if voted to power.

In a move that could potentially upset plans of several big retailers, including the retail arms of Tatas or Birlas, the BJP manifesto for the 2014 elections said, "Barring the multibrand retail sector, FDI will be allowed in sectors wherever there is prospect for jobs and asset creation, infrastructure and acquisition of niche technology and specialised expertise. BJP is committed to protecting the interest of the small and medium retailers, small and medium enterprises and those employed by them,"

While there was a sense of disbelief, several industry leaders either avoided commenting on a political issue or dismissed it as an 'election manifesto' talk aimed at garnering votes and not the final word.

Damodar Mall, CEO of Reliance Retail's hypermarket and supermarket division, said, "I would not like to comment on election manifesto."

Sanjeev Goenka, vice-chairman of RPG Enterprises, and his son Shashwat Goenka refused to comment on a "political issue." Spencer's official spokesperson also didn't offer any comment.

Kumar Rajagopalan, CEO of Retailers Association of India, said, "All

the doors are not closed. Many foreign retailers were in the process

of entering the country by setting up wholesale companies. Nothing has

changed much. We will wait till the elections are completed."

Big chains like Future group, K Raheja group and the Tatas are

interested in foreign investment. When contacted, Rakesh Biyani, joint

managing director of Future group, said, "Cannot comment on a

political manifesto."

In March 2014, British supermarket chain Tesco formed a joint venture

with Tata's Trent for multi-brand retail. Last year, Walmart ended its

joint venture with Bharti Enterprises, citing 'critical stumbling

block' to its trademark consumer stores.

At present, 100 per cent FDI is allowed only in the cash-and-carry

business and single-brand retail. In September 2012, the government

for the first time allowed FDI in multi-brand retail, subject to

approvals by individual states.

Arvind Singhal, chairman of Technopak, a management consulting firm

that specialises in retail, consumer products and e-tailing, said, "It

is just a political statement aimed at getting votes. If BJP comes to

power with a lot of strength on its own, it will have a very pragmatic

business policy. In the context of the political environment, it is a

non-biased comment."

However, some retail industry stalwarts also welcomed the move.

Venugopal Dhoot, owner of the Videocon group, said, "FDI in retail is

not welcome in this country, as it can lead to considerable job

losses."

BJP said FDI in multi-brand retail would hit the business of 'mom &

pop' stores across the country. Since small and medium retailers form

the core vote base of BJP, the party does not want to hurt them. The

party had also opposed the bill in Parliament last year.

Shital Mehta, CEO of Pantaloons, part of the Aditya Birla group, said:

"It should not affect us, as we mainly deal in apparel and we are a

local player."

Despite repeated attempts and text messages, Pranab Barua, retail and

apparel business director at Aditya Birla group; Govind Shrikhande,

CEO of K Raheja group firm Shoppers Stop, and Mark Ashman, CEO of

HyperCITY, could not be reached for comments.

Rajagopalan of Retailers Association of India told Financial Chronicle

that the group has been asking political parties to recognise retail

as a contributor to the economy and ease regulations.

"The BJP manifesto says no to FDI in multi-brand retail, but there are

some other proposals that will help the retail industry. They are

talking about modernising retail and simplifying the licencing system.

Currently the industry has to seek multiple licences and go through

complicated procedures. The party also talks about connecting retail

with agriculture and a GST-type sales tax regime," Rajagopalan said.

meghnamaiti@mydigitalfc.com

(With inputs from Ritwik Mukherjee, Sangeetha G)

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