BackRetail FDI stand may dampen investments
Experts say the BJP's move to bar FDI in multi-brand retail is a dampener for supermarkets such as Wal-Mart and Carrefour
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New Delhi: The Bharatiya Janata Party’s (BJP) move to bar foreign direct investment (FDI) in multi-brand retail is a dampener for supermarkets such as US retailer Wal-Mart Stores Inc. and Carrefour SA of France that are eyeing India’s $400 billion retail sector, experts said.
“The move will disappoint foreign retailers," said Abheek Singhi, a partner and director at consulting firm Boston Consulting Group.
“These are serious signals going out to retailers who have spent time investing and creating assets here in India," said a former senior executive of a large foreign supermarket chain, requesting anonymity. “The companies will have to figure out how to take their business forward depending on which government comes to power."
The BJP has consistently opposed the entry of foreign retailers, protecting the interests of local traders and farmers who are a significant vote bank for it. In 2011, opposition parties forced the government to roll back moves to support the entry of foreign supermarkets. In September 2012 foreign retailers were permitted to invest up to 51% in multi-brand retail, but the move elicited a feeble response owing to clauses such as mandatory 30% sourcing from India.
However, in December, British retailer Tesco Plc said it would invest $110 million in a joint venture (JV) with the Tata group’s Trent Retail to open a chain of multi-brand stores.
An official close to the Tesco-Trent JV said, “In case the BJP comes to power and does retrospective amendments, it will be very unfortunate. However, for now we will move forward without any change in our investments/plans."
An analyst with a large consulting firm said: “The government cannot take away an approval or ask companies to disinvest. It will have negative impact on the future of modern retail in the country, as companies here are in dire need of infusion of funds." Both asked not to be named.
Franck Kenner, operations director at Carrefour WC&C India Pvt. Ltd, which operates a cash-and-carry store in Delhi, said it wouldn’t be able to comment “at this point of time".
Sapna Agarwal in Mumbai contributed to this story.
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