President Obama pitches for opening up Indian retail

The chorus for opening up Indian retail sector to FDI

has just got stronger, as President Barak Obama too has said India should open up its retail sector to foreign investment, during his visit to India. He said India should lift restrictions on foreign direct investment in multi-brand retail, saying old concerns that small shopkeepers would be impacted ignore today’s reality. Interestingly, many MNCs including Wal-Mart and others interested in investing in India have been voicing the same lines for some time.

In fact, while addressing the US India Business Council summit in Mumbai, Obama flirted with the issue that raises bogey in India by saying, “Here in India, many see the arrival of American companies and products as threats to small shopkeepers and to India’s ancient and proud culture. But these are old stereotypes and old concerns that ignore today’s reality.” He said India’s commitment must be matched by steady reduction to barriers in trade and foreign investment from agriculture to infrastructure and from retail to telecommunications.

It may be noted that at present, India allows 51 per cent foreign direct investment in single-brand retail and 100 per cent in cash-and-carry stores that can only sell to other retailers and businesses, but not to individual buyers who buy for home consumption. The relaxation in FDI will accelerate the growth of modern retail and the investments in backend and supply chain will help entire industry, said Thomas Varghese, chief executive of Birla Retail, which operates stores under the More brand name.

For many global retailers, the Indian market is one of their last bastions for growth primarily because of stagnation in consumer demand in their home countries as compared to strong double digit growth in India. Consistent fear that millions of small traders and mom-&-pop stores could lose their business to large retailers is one of the major hurdles in opening up the retail sector for global retailers.