The debate on opening up FDI in multi-brand retail took centre-stage on day one of the India Retail Forum (IRF) in Mumbai on Wednesday.
Representatives of modern retail made the case for FDI in order to facilitate expansion, even as trader associations opposed the idea.
Mr Bijou Kurien, Chairman, IRF, and President and Chief Executive, Reliance Retail Lifestyle, noted that investment — domestic or foreign — was required for the sector's growth in India. He said, “Between 1.6 to 2 times is the ratio of investment turnover in the sector, making funds for expansion a challenge without infusion of funds. With domestic investors, there are limitations of volume of investment.”
Mr Kishore Biyani, Founder and Group CEO, Future Group, noted, “The major issue of controversy between the Government and industry is the food business, which impacts 65 per cent of the population. Modern retail drives consumption of processed foods, which promotes economic activity. Processed food cannot be sold at mom-and-pop stores. Impetus to modern retail will come from FDI, because foreign investors in retail have a long-term perspective — they look at a horizon of 10 to 20 years, unlike domestic investors.”
Mr Thomas Varghese, CEO, Aditya Birla Retail, said, “It is not that domestic funds are not available, but not to the extent that is required. We need investments not just on the front end, but also on things like technology and the back end.”
Mr Viren Shah, President, Federation of Retail Traders Welfare Association, and Mr B.C. Bhartia, National Federation of All India Traders, alleged that the interests of small traders would be compromised with the opening up of FDI.
Speakers also noted that foreign players' entry would bring in not just the funding, but also know-how, notably on the technology front.
Quoting the example of Titan Industries and Future Group, which had pursued a successful retail expansion even without FDI in multi-brand retail, Mr Ajit Joshi, Managing Director and CEO, Infiniti Retail (Croma), countered, “Let us look at who supplies technology to global retailers - the likes of TCS, Infosys, Wipro and Mahindra Satyam. I don't necessarily think an international player will bring in the know-how. I also don't understand how Indian their managers will be, and how they will understand Indian consumers and the retail ecosystem.”
He added, “I am for FDI, but we need to be a bit careful with bringing in the right partner, and about ensuring it's a sustainable arrangement going forward for all stakeholders,”
Existing Indian players' interests should be protected while allowing FDI in multi-brand retail, argued Mr Nikhil Chaturvedi, Managing Director, Provogue. He observed that China had allowed 100 per cent FDI in retail in 2004, only because it was inevitable in 2007 because of a commitment to the World Trade Organization.
“Give Indian companies a level playing field before allowing FDI. Give Indian companies a head start. Listed companies can as of today only have up to 25 per cent FII funding. If you allow them the same 49 (or 51) per cent proposed for FDI investments in multi-brand retail, they can sell their 24 per cent in less than three months. Allow them 49 per cent foreign funding, and allow FDI after two years,” he added.