New Delhi: Indian retail may lose foreign direct investment (FDI) of up to Rs400 crore this fiscal because of last week’s recommendations by the Parliamentary Panel on Commerce, which has opposed further leeway to the entry of international retail brands in the country.
According to global consultancy KPMG, many major Indian retail players are also likely to be affected if the report’s recommendations are implemented, while some foreign players might cut down their investment plans.
“After the IKEA debacle, India Inc could lose as much as another Rs400 crore in 2009-10 due to the stand in the parliamentary report,” KPMG advisory service manager Anand Ramanathan said.
IKEA, the Swedish home furnishing major, had last week announced its decision to shelve plans for venturing into single format retailing in India following the panel report.
Following IKEA’s decision, other foreign retailers are also likely to re-visit their plans.
“Carrefour, Cartier, Armani, Tesco and UK-based Curry’s and Sports Direct International could be some of the foreign retail players to cut down their investment in India following the government’s FDI policy on retail,” Ramanathan said.
According to KPMG, Indian retailers should focus on increasing profits through sales growth rather than merely adopting cost-cutting strategies.
“They (Indian retail companies) should aim to reduce stock-outs, avoid bargain hunting, increase inventory turnover and control shrinkage. In the current scenario, the retailers should also try to re-negotiate the real estate rentals,” Ramanathan added.