No multi-brand FDI investment likely in next 2-3 years: Crisil

Foreign supermarkets or multi-brand retailers

are unlikely to make significant investments in India in the next 2-3 years, mainly because of the government’s restrictive policy for such investments, rating agency Crisil has said in a note released recently. The government on June 6 issued clarifications pertaining to mandatory investments and sourcing, which Crisil said will deter foreign investment in multi-brand retail as investors had been hoping for a relaxation of the rules. Uncertainties in both the global and domestic economies and the national election scheduled for 2014 would also delay investments, it said.

“In the event a retailer decides to invest, it will be another 2-3 years before the retailer can roll out greenfield back-end and front-end infrastructure needed for a sizeable scale of operations,” Crisil said in its report.

Growth in India’s organized retail market slowed to 10 percent in 2012-13 from the average 20 percent growth seen during 2009-10 to 2011-12, Crisil said. Although growth is expected to pick up, it will remain moderate at 14-15 percent over the next two fiscal years (2013-14 and 2014-15), it said. Many global retailers are facing pressures on profitability in their home markets, and are unlikely to commit aggressive investments in foreign markets in the near future, Crisil added.