The expectation is clear and so is the mandate. The new government has been vested with the power to form a stable government, especially so with no dependence on the Left party alliance. Thomas Varghese, CEO, Aditya Birla Retail Ltd. (ABRL) and also the chairman, CII National Committee, Retail, says, “We expect that the government will now focus on the liberalisation agenda particularly with respect to FDI and other investments which was announced a few months ago.”
With this mandate the electorate has given the retail industry reasons to cheer, while bringing some good news to the overall business in general at the time of the global economic crisis. The slowdown impacted the soaring graph of the retail sector in India with an abrupt decrease in consumer spending, almost non-availability of fresh investment and an overall cash crunch that almost stranded the industry’s operation, development and expansion.
The organised retail sector, that was growing at an annual rate of 30 to 35 percent before the slowdown, has now come down to an estimated 10 to 15 percent. Now the much debated issue of whether the new government with a change in policy could allow FDI in retail has gathered momentum.
indiaretailing.com attempted to gauge the opinion across business sectors with its poll that asked: ‘Unburdened by the Left, will the new Indian government find it easier to liberalise retail or not?’ A majority of 67.5 percent voted in favour of the capability of the new government to be able to bring the change in the retail sector, saying ‘Yes’. Whereas, 13.9 percent remained unsure about the government’s will on the issue saying ‘No’ to the question, as compared to 18.6 percent who showed a relatively more positive outlook and went with the option of ‘Wait-and-Watch’ approach towards the government’s plan of action.
According to the industry, at this point of time the new government could actually help bring in capital from outside the country, thereby allowing retail businesses to get the much needed funds for expansion, bring in new brands, and competency in terms of back-end processes and technologies from established retail players from across the world.
Samar Singh Sheikhawat, vice president, Spencer’s Retail Limited says, “Now it’s the time to take a decision on FDI and liberalisation that will foster competition, expose Indian retailers to better industry know-how and ensure flow of funds for the domestic players as well.”
In the business of modern trade the current guidelines do not allow any FDI in front-end and multi-brand retail, but allows it for whole sale cash and carry and up to 51 percent stake in single brand retail. The global retailers like Wal-Mart, Carrefour, and Metro have either entered into franchising, licensing arrangements or joint venture with the Indian players and thus eagerly waiting for guidelines to be liberalised in the coming months.
S Raghunandan, head-Retail, Forum Bangalore, puts forward his expectations from the government on the issue, “As far as retail liberalisation goes, if it happens, more and more international brands will come to India.” One of the problems in India is that there are not enough brands for a good quality mall, opined Raghunandan. “We would always be more than happy to welcome more international brands in India. Liberalisation means better quality and better brands in retail; the time is ripe and we are all waiting for it.”
“Malls have to depend both on national as well as the international retailers. Once the exposure of the international retail brands comes to people, it will help in increasing the footfalls in malls and that’s what our expectation is all about,” states Arshad at APK Builders. “To simplify the path for organised retail, we would request the government to streamline the processes,” says Varghese at ABRL.
According to Vikas Bagga, VP, marketing and corporate affairs, M&B Footwear, “Looking at the strong resolve being projected by the new government, it is quite apparent that the overall market would be much more dynamic and the retail sector will get a definite boost.” This could be a blessing for a lot of medium-size enterprises and brands that want to make an entry into the country, especially the ones who are watching from the sidelines to be here, says Bagga. “The eager to be entrants will come up with an expanded business plan,” reveals Bagga.
It is imperative for the new government to come up with growth conducive policies, formulation of one national policy for the industry enabling uniform rules and regulations for all the states and ensuring availability of easy credit to the retailers following the process of liberalisation, viewed Sheikhawat at Spencer’s.
With the much awaited expectation that the government will go in for opening the retail sector to foreigners, the great growth potential of the retail industry in the coming years can be ensured and that can even have beneficial impact on GDP growth led by growth in consumption, opined the experts and analysts. The expectation rises higher as the retail majors voice for more. “The retail sector is a major source of employment in this country and will serve as a vehicle to augment revenue from the large retail industry,” expressed Varghese at ABRL.