New Delhi: Hard-pressed for cash, the domestic retail industry expects the UPA, which is very likely to form the next government, to boldly open up the sector for foreign investment.
Fast-moving consumer goods companies, which have a strong nexus with the retail chains, would like the government to speed up further investment in rural India. An expanding rural market played a significant role in making up the weakness in the urban area for several FMCG companies.
“The clear mandate is a positive development. The government should allow foreign players and FDI without any restriction into the retail sector and also give the retail sector the status of an industry,” Vishal Retail Group president Ambheek Khemka said.
At present, India does not allow FDI in multi-brand retail. FDI is allowed in single brand retail and through the cash and carry (wholesale) models.
The country has a huge retail market worth $332 billion (2007 figure) of which the organised players like Reliance Retail, Spencer’s Retail, Vishal Retail, the Future Group and ‘More’ of the Aditya Birla Group account only for 5.8%.
“We are already one of the largest employers in the economy and the sector has lot of potential. We want them (government) to lift all restrictions of entry of FDI as it could create better competition,” Khemka said.
Under the impact of the global downturn, organised retailers are facing cash crunch as a result they are putting their expansion plans on hold. While some of them had opposed the FDI in the sector, several of these firms are now lobbying for opening up of the sector.
As for the FMCG companies, which act as the main supply-line for the front-end retail stores, a rural push would help the economy to get back on the fast track. Emami Group director Aditya Agarwal said a strong showing by the Congress and UPA would bring in a stable government.
“We expect the new government to spend on infrastructure project like roads and ports because these are important aspects for business to grow. They should also put more emphasis on agriculture. When agriculture sector grows, it will help the FMCG sector also,” Agarwal added.
Bharti Enterprises Ltd, a big player in the organised retail segment, also asked for FDI in the sector.
“It (retail sector) needs to grow and I have always maintained that retail is not just about the content but retail is about warehousing, cold chain, logistics, farming sector... we believe that the new government must look at retail to be opened up. When I talk of retail opened up I am talking about FDI to be brought in,” Bharti Enterprises Ltd vice chairman and MD Rajan Bharti Mittal said.
Another leading retail player, Koutons Retail also welcomed the poll verdict.
“The return of the UPA would mean faster decisions and less time lag as the government led by UPA allies have already been working on reforms and revival,” Koutons Retail president Balvinder Singh Alhuwalia said.
He said the new government should work towards increasing disposable income so that ordinary customers have more money to spend.
“This would benefit the retail sector. Besides, the sector should get status of an industry so that we can also avail of financial and other support from the government,” Alhuwalia added.
FMCG and retail players, including Dabur India, Marico, Coca Cola and Carrefour, refused to give any reactions to the election verdict.