What do we expect from FDI?

 

Finally the speculation on the much awaited 51 per cent FDI in multi-brand retail comes to an end with the cabinet allowing the same. The mood is upbeat within the retail industry and speculations amongst the industry stalwarts are already making rounds about which labels will make an India entry and how much money will pour in. The Indian retail sector stands at about $450 billion with organised retail accounting for around five per cent of the total market. 

Government gets the applaud

The government for sure in winning applause from the industry who are all praising the government for its move. The applause comes from the industry in spite of strong rancor from some who fear the loss of larger interest.  Raj Jain, President Walmart India and MD and CEO, Bharti Walmart says, “We believe that allowing 51 per cent FDI in multi-brand retail is an important first step for the Government to further liberalise this sector. We are grateful that the Government has realised and appreciated the value that we will bring to strengthen the Indian economy.   This policy change will allow us to connect directly with the consumer and save them money.”

Harsh Pati Singhania, Director, JK Organisation and President, International Chambers of Commerce, India says, “Government should be complimented for bringing back economic reforms on the agenda. It is a bold move putting national interest ahead of political considerations. Government has tried to tackle many important issues, eg, subsidies (diesel price hike), revenue generation (disinvestment), taking long term measures to bring efficiency in the food supply chain (multi-brand retail).” Agreeing Sanjay Dutt, Executive Managing Director, South Asia, Cushman & Wakefield comments, “In a period, when we are learning only about poor economic performance on various fronts, this decision will serve to boost overall sentiment and the economy. Not just within India, but also internationally, the decision will be taken notice of and applauded. “

States: The decision-taker

The states are now the kings as the government has left the decision in their hands. Dipak Agarwal, Chief Executive, Operations & strategy, DLF Brands says, “The government has taken a bold step and in the right direction. Now we have to see how states co-operate to this policy.”

The states have to look at the horizon and take this forward. Commenting on what role states should play, DK Jairath, CEO, Evok says, “It is a balancing act between the polity and the economy. The states will now have to think progressively and understand the larger picture and not short term benefits. There should be consistency in policy between states.” 

The details are still under covers and can change the game if they run parallel. Kumar Rajagopalan, Chairman, Retailers Association of India says, “At RAI, we are happy about the announcement. Now the need is to understand what kind of money will be coming and which brands plan to enter the Indian market. Initially, there will be nuances around the state-wise freedom of implementation and non implementation and also around 30 per cent procurement policy. The clarification of the norms for the 30 per cent sourcing clause for single-brand retail has come across after a really long time. Hopefully, it’s not the case here and the clarity comes in sooner.” Giving the farmers perspective, Ajay Jakhar, Chairman, Bharat Krishak Samaj says, “We are not exactly thrilled as we would have hoped for more conditions to help farmers become a part of India’s growth story.” However, Pankaj Renjhen, Managing Director, Retail Services, Jones Lang LaSalle India has something else to say. He informs, “The increased flow of capital, if used effectively, will benefit both the farmers and the consumers. Farmers will benefit from the better price indexing and direct selling to the retailer. The consumer, in addition to having a better shopping experience, will benefit from the competition and the resultant reduced prices.”

Addressing the farmers say to the Prime Minister of India in a letter, Chengal Reddy, Secretary General, Consortium of Indian Farmers Association reiterated, “FDI will help in curtailing wastage which amounts to about `1 lakh crore every year. Understanding the consumer preference for quality parameters by the farmers and arranging forward and backward linkage by retail will result in a win-win situation for producers and consumers. FDI will help five lakh villages in having infrastructure, trained manpower and other facilities. This will further enable contract farming which provides assured price.”

Boost to Back end ops

Increased investments will give a kick to the back end operations for the retail industry. They will move a notch higher as the retail environment gets more competitive and they have more funds at their disposal. Vikram Bakshi, Managing Director, Mc Donald’s India at the Retailers Networking Meet organised by Retailers Association of India commented, “Much awaited 51 per cent FDI is announced, This was required for the infrastructure developments which include cold chain, supply chain, logistics, and also for marketing and promotion. Retailers welcome this particular decision by the government.” Bharti Walmart is all out to do its bit for the industry. Jain says, “By being ‘stores of the community’, we will also help them live better. We are willing and able to invest in back-end infrastructure that will help reduce wastage of farm produce, improve the livelihood of farmers, lower prices of products and ease supply-side inflation. Through these, and several other initiatives, we hope to make a positive impact on the lives of the people of India.”

Consumer rejoice

The customer will surely gain out of this as they will have greater access to many more international labels. Competitive pricing and better quality will also add to their retail experience. 

The mood is happy and the sentiment is high for now, what we have to watch out for are the intricacies of the policies and how they will open up and turn out for the Indian retail industry. Let’s see how retailers capitalize on the opportunity. As Harish Bijoor, Brand-expert & CEO, Harish Bijoor Consults Inc wraps up, “Finally it’s time to stop plucking the low hanging fruit of opportunity alone and reach out and grab the higher hanging fruit. And when you try for this, you will now compete with the best in the world. We are therefore one step closer to the Walmartization of India!”           

 

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