NEW DELHI: While a cloud of uncertainty looms over the future of foreign retailers in India with the BJP manifesto looking to keep FDI out of multi-brand retail, homegrown retailers seem to be heaving a sigh of relief.
The Opposition’s plans may have come as a big blow to large multinationals such as, Walmart, Carrefour SA and Tesco, which were looking to tap India’s fast-growing retail market. However, to their Indian counterparts, the move seems to have opened a new window of opportunity. “With the competition out of the way, we will have room to prosper more,” says Kishore Biyani, founder and group CEO of Future Group, credited with creating some of the country’s most successful retail chains including Big Bazaar, Planet Sports, Ezone and Home Town.
In the face of some spirited resistance, in 2011, the ruling UPA government announced retail reforms in both multi-brand and single-brand stores that witnessed international multi-brand and single-brand retailers including Tesco, Apple and Ikea firm up their plans to tap the country’s lucrative market.
Next year, the government opened up 51% FDI in multi-brand retail with a tough disclaimer that foreign retailers would have to source at least 30% of their goods from small local suppliers. This did not go down well with big retailers such as, Walmart and Carrefour and both decided to play the wait-and-watch game. In the meanwhile, earlier this year, the world’s third largest retailer Tesco entered into a 50:50 joint venture with Trent Hypermarket, a unit of the Tata Group that operates the Star Bazaar retail business.
“The news of BJP’s manifesto comes as a dampener since a lot of foreign players were waiting in the wings to invest in the Indian retail market. But, if you look at the positive, it has put to rest a lot of conjecture about the future of FDI in multi-brand retail in India. Now, both investors and companies have a clearer picture,” aays a retail expert who does not wish to be named:
Experts believe that after coming to power if the BJP goes ahead with its plans, foreign investment in retail in India will dry up and in the process would give rise to a lot of joint ventures. “Some domestic retailers were looking forward to investments from foreign players to grow their businesses. They will have to figure out other ways,” says the expert.
Biyani refutes the claim. “People might have been looking for help at one point in time, but not anymore,” he says.
While most international retailers were not comfortable commenting on BJP’s plans, Arvind Singhal, chairman of retail consultancy Technopak Advisors, brushed aside the party’s manifesto as another political document to lure vote banks. “A manifesto is not etched in stone,” he says. “We have to wait till the polls are over. BJP might just come up with a better policy, as the one announced by the UPA was anyways next to impossible for foreign retailers to comply with. This is not the end of the road.”