'Foreign retailers may not enter India before 2014 elections'
Foreign retailers like Walmart, Tesco and Carrefour are unlikely to enter the supermarket business in India before the 2014 general elections even though the government has partly addressed their concerns and relaxed the norms, industry experts say.
New Delhi: Foreign retailers like Walmart, Tesco and Carrefour are unlikely to enter the supermarket business in India before the 2014 general elections even though the government has partly addressed their concerns and relaxed the norms, industry experts say.
"Multi-brand retail business requires quite a large investment. I think retailers will prefer waiting to see more clarity," Anis Chakravarty, senior director, Deloitte in India, told IANS.
He said the government has tried to address some of the concerns raised by global retailers like Walmart, Tesco and Carrefour.
The government last week decided to dilute many contentious conditions in the multi-brand retail policy, including 30 percent sourcing from small firms, 50 percent investment in back-end infrastructure and access only to cities with over one million population.
Chakravarty said although Thursday's cabinet decision had brought some clarity in the policy, a lot of other ambiguities continued, and the retailers would like to get them addressed before taking the investment decisions.
The government has relaxed the policy related to the mandatory 50 percent investment in back-end infrastructure. As per the revised norms, retailers would be required to invest 50 percent in the back-end only of the investment that they bring for the first time. The minimum required investment is $100 million (nearly Rs.600 crore).
Chakravarty said confusions remained on whether the mandatory back-end investment has to be in "green field" or not.
"The changes to the policy remove some of the critical apprehensions that retailers had - it is a very positive step," Mohit Bahl, partner, KPMG in India, told IANS.
Political uncertainty is another major reason for delay in the global retail giants' entry plan into the Indian markets.
Several political parties, including the main opposition Bharatiya Janata Party (BJP) and left parties, have been opposing the policies. The BJP has said that it will reverse the government's decision on allowing the foreign retailers into Indian markets.
Talking to IANS, Praveen Khandelwal, secretary general, Confederation of All India Traders, accused the government of working under the pressure of global retailers like Walmart and Tesco.
Khandelwal said opposition parties including the BJP and left parties have assured the trade body that they would raise the matter in the monsoon session of parliament that begins Aug 5.
"Despite all these changes, I don't think any global retailers will come to India before the next general election," said Khandelwal, adding the BJP's opposition to the policy was scaring the retailers.
The government last year had opened the gates for the multi-brand retail sector to foreign investors by allowing up to 51 percent FDI. However, no foreign investment has taken place in the sector so far.
Explaining the relaxation in the policy, Commerce and Industry Minister Anand Sharma said last week that the government had taken the decision after having consultations with foreign as well as domestic retailers.
The government has relaxed the FDI policy for several sectors, including telecom and retail, to boost inflow of foreign money in a bid to revive the economy and control current account deficit.
Current account deficit, the difference between the country's total imports of goods, services and transfer and their exports, touched a record high 4.8 percent of GDP in the financial year ended March 31, 2013. The government targets to bring it down to 4.2 percent in the current financial year.
Sluggish exports and a sharp drop in FDI are the main reasons behind the high current account deficit.
The Foreign Direct Investment inflows to India declined to USD 22.42 billion in 2012-13 from USD 36.50 billion recorded in the previous year.