Foreign multi-brand retailers hold their India plans

Though Indian government has allowed 51 percent FDI in multi-brand retail, and also relaxed some mandatory norms that were causing hurdles for foreign retailers’ entry into the country, so far except for Tesco-Tata venture, no other foreign retailer has applied for India entry. Carrefour and Walmart have

decided to wait till the forthcoming Lok Sabha elections. The latter is planning to launch an online marketplace model for now. Commerce and industry minister Anand Sharma had claimed that after Tesco, there would be one more foreign retailer entering the multi brand retail space, however, sources have denied having received any new proposal.

Also

despite the Centre allowing FDI in multi-brand retail, the final decision to allow a retailer set a shop has been left to the state governments, further putting foreign retailers in a fix.

Brands wait and watch

The world's second-largest retailer, 76-billion euros (6,46,930 crores) Carrefour was speculated to be firming up its entry into the multi-brand retail segment with its chairman and CEO, Georges Plassat visiting the country recently. Sources claimed that the retail major was in talks with Indian retailers like K Raheja-owned HyperCity, a subsidiary of Shoppers Stop, and Kishore Biyani-promoted Future Group, however, Biyani had denied negotiating with Carrefour.

There were reports that Bharti Retail, after parting ways with Walmart, is in talks with Japanese retailer Aeon and French retail giant Carrefour for a possible partnership in the cash and carry retail market in India. However, Aeon has refuted the media reports. Also leaving behind its plans of opening retail stores through a new domestic partner, Walmart too is busy strategizing its e-commerce play in the country. The retailer is said to be working on a business model similar to that used by US-based Amazon and eBay.

Politics pose hurdles

Last August, the government tried to simplify the policy hoping to attract global retail chains. It relaxed some of the conditions pertaining to the 30 percent mandatory sourcing clause, investment in back-end infrastructure and permitting to enter any state in the country irrespective of the population there, but only if that particular state wants to allow it. On the other hand, international retailers are now wary of the fact that if the next government is formed by BJP-led NDA, then the policy might be withdrawn altogether.

Recently, Arvind Kejriwal-led AAP gave a shocker to foreign retail biggies by refusing to allow foreign investment in multi-brand retail in New Delhi after it took charge of the state. Even BJP ruled states are against FDI in multi brand retail. So after Delhi, other states ruled by BJP like Rajasthan may not allow global retailers leaving a very limited apace for retailers such as Tesco, Walmart or Carrefour to explore one of the world's fastest growing and largest retail markets.

As per recent media reports, more than a dozen states, including Uttar Pradesh, Bihar and West Bengal have ruled out FDI in the multi-brand retail segment already. Outside north India, the new political contours leave only three large and prosperous states — Maharashtra, Karnataka and Andhra Pradesh ruled by the Congress, as potential avenues for foreign retailers.