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Liberalised FDI norm in single brand retail draws mixed reactions

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The Union cabinet’s approval of 100 per cent Foreign Direct Investment (FDI) in single brand retail on Wednesday drew mixed reactions with industry observers lauding the move while traders’ bodies opposed it as “a serious matter for small businesses”.

“This is another positive step from the Government towards ease of doing business in India. By allowing 100 per cent FDI in single brand retail under the automatic route, foreign entrants will find it easier to set up operations in the country,” said Dhanraj Bhagat, Partner, Grant Thornton India LLP.

However, the Confederation of All India Traders (CAIT) strongly condemned the Government’s decision stating that the step will affect smaller businesses by paving way for the foreign brands to dominate the country’s retail trade.

“The CAIT strongly opposes the move to allow 100 per cent FDI in single brand retail through automatic route as it will facilitate easy entry of multinational corporations in retail trade of India and will also violate poll promise of BJP,” the traders’ body said in a statement.

“It’s a serious matter for small businesses. It is a pity that instead of formulating policies for the welfare, upgradation and modernisation of existing retail trade, the government is more interested in paving way for the MNCs to control and dominate the retail trade of India,” it added.

The CAIT also pointed out that such a step will result in a large number of “people being left jobless”.

According to Aashish Kasad, India region tax leader, consumer products and retail, EY India, the step will give the Indian consumers access to several international brands.

“Permitting 100 per cent FDI in single brand retail under the automatic route is another progressive step by the Government of India towards attracting foreign investment and ease of doing business in India. This should also generate employment and give the Indian consumers access to several international brands,” said Kasad.

Rajat Wahi, Partner, Deloitte India, said: “Global brands across different categories, from apparel to electronics to accessories will be aided through this, providing further options to Indian consumers and improving India’s ranking in ease of doing business.”

“The relaxations in FDI policy announced by the Cabinet today are most welcome and would certainly lead to further increase in foreign investment inflows,” said Chandrajit Banerjee, Director General of the Confederation of Indian Industry.

“Today’s announcement includes multiple measures targeted at specific sectors where opportunities exists,” said Banerjee.

In major changes liberalising FDI in key sectors, the Union cabinet on Wednesday approved 100 per cent foreign investment in single brand retail trading.

“It has now been decided to permit 100 per cent FDI under automatic route,” an official release said here, following a Cabinet meeting.

“It has been decided to permit single brand retail trading entity to set off its incremental sourcing of goods from India for global operations during initial five years, beginning April 1 of the year of the opening of first store against the mandatory sourcing requirement of 30 per cent of purchases from India,” it added.

Here is how the retail fraternity reacted:-

Janne Einola, Country Manager, H&M India Retail

“We are happy to hear about the India sourcing requirement being offset towards H&M’s global sourcing from India, while it is in the right direction, we look forward to the same relaxation for the period beyond the initials 5 years as well, in view of ease of doing business in India.”

Abhishek Ganguly, MD, PUMA India

“This is a very progressive step and in the right direction. This will encourage more brands to look into the Indian market. Being one of the first brands to get approval (when it was regulated and not automatic) for 100 percent FDI in single brand, PUMA has opened 65 stores which are directly operated by the company. Having reached here, we feel the step simplifies the business and gives opportunity for companies to directly focus on the giving more benefit and service to the consumer.”

Karan Behal, Founder & CEO, PrettySecrets

“In a market like India, which is one the world’s most opportunistic markets, where the retail industry has emerged as one of the most dynamic and fast-paced industries, this news of 100% FDI in single brand retail is one of the most optimistic development.

The country will now see the biggest retail players globally enter the Indian shores as individual brands, which would have a greatly positive impact on the economy as a whole. This would also mean the country would now see a lot more retail footprint from brands all over and there’ll be much more buying in the country which is always a good thing for a retail brand.

I believe this would also be very impactful to lingerie brands within the country as the segment is already at a higher growth rate than apparel and now with this, it would mean the Indian audience would be much more evolved than it currently is.”

Ramesh Kaushik, VP – Brand Experience, Blackberrys

“With an expected positive impact on employment, this move should also add more purchasing power and bring larger customer base into the fold. In the prima facie, everyone stands to gain with this move.

Salesh Grover, Business Head, OSL Luxury Collections Pvt Ltd – Corneliani 

“With the advent of new FDI norms ease of doing business and investment through foreign sector will turn India into a global investment hotspot. Government’s announcement to liberalize and simplify the FDI policy will have manifold advantages, foremost being creation of employment. It will definitely provide more choices for the Indian consumer. With easy, rationalized and simplified process of foreign investment in long run will strengthen the value of the rupee against global currencies. Importing better technologies will be in the long term interest of the country. This will also act as a catalyst to Make in India Policy.”

Kim Virk, Business Head, Carlton London

“Allowing 100 per cent FDI for foreign investors to set up and function from India, is a major step towards development as they would find it easier to run their businesses. Although this drew mixed reactions from various key businesses, mostly Confederation of Indian Traders (CAIT) strongly condemned this stating that small businesses would be vastly affected as 100 per cent FDI ensures big foreign retail brands will dominate the retail market. For the consumers, this is a very good news as they will get access to thousands of foreign brands. We are anticipating that such initiatives from the government will definitely bring a business boom across the retail sector.”

Viraj Bahl, Founder and MD, Veeba Food Services

“The move definitely impacts investor sentiment positively. With regulatory approvals easing, the doors will open for a lot more of the foreign money to come in. This will have a positive impact on investor outlook towards India, especially on the private equity side, which will rub off on the larger ecosystem too.”

(With inputs from IANS)

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