Multibrand retail out of FDI ambit

Tags: News
The first day, first show of the Modi government offered a lot of promise, but not for the multinational retail chains.

New commerce and industry minister Nirmala Sitharaman on Tuesday dropped enough hints that it was not going to be easy for foreign multibrand retailers to enter the country under the Modi regime.

The BJP has clar­ified its position on this politically-sensitive issue in the election manifesto, Sitharaman said after assuming office as minister of state with independent charge of commerce and industry.

“The party position is clear. We have explained that it is probably not the best option to open FDI in multibrand retail (MBR) now, because medium and small-sized traders and small farmers have not been adequately empowered... If you open up the floodgates of FDI in MBR, it may affect them,” she said.

Sitharaman, a former manager with Pricewaterhouse Coopers, didn’t specify whether her ministry would rescind the current FDI policy, allowing 51 per cent FDI in multi-brand retail.

“The BJP manifesto clearly states that barring multi-brand retail, FDI will be allowed wherever needed for job and asset creation, infrastructure building and acquisition of niche technology and specialised expertise.”

The UPA government had cleared one multi-brand FDI proposal, that of British retail giant Tesco, which has since formed a 50:50 joint venture with Tata group company Trent. The retailer invested about £85 million in March for a 50 per cent stake.

Eleven Congress-ruled states had initially agreed to allow up to 51 per cent FDI in multi-brand retail, but two — Delhi and Rajasthan — later reversed the decision after the Aam Aadmi Party (AAP) and the BJP came to power there. The Delhi assembly has been kept in suspended animation since the Arvind Kejriwal-led AAP government resigned after ruling for just 49 days.

The new Union minister said her ministry would look at the FDI policy in a calibrated way, but added that the emphasis of the Modi government would be to maximise job creation by pushing growth in manufacturing and export-oriented sectors.

The Retailers Association of India, an industry body of domestic retailers, said it would wait for more clarity from the government. “We will have to wait and watch. If they don’t allow FDI in multi-brand retail, then big foreign retailers may not be able to enter India. There were a lot of encouraging signs for the retail sector in the BJP manifesto,” association CEO Kumar Rajagopalan said.

Future Group founder and chief executive Kishore Biyani declined to comment, but in an earlier interaction he had urged the new government to frame a new retail policy under which segregations and FDI restrictions would not be based on single or multi-brand but on store types.

“We have to redefine retail in India. Nowhere in the world, there is single brand and multi-brand retail. We should classify them as convenient stores, supermarkets and hypermarkets and frame the policy accordingly. You allow or restrict foreign investment in which kind of stores you like,” he said.

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