Retailers fear that opening of multi-brand retail to foreign investment may not materialise anytime soon with the setback for the Congress in the assembly elections as UPA government’s ability to go ahead with reforms has weakened.
“It is highly unlikely (FDI in multi-brand retail). As it is they (Congress) were having a problem and now the situation is even more difficult for them...we do not see anything happening in the near future,” FICCI Director (Retail and Consumer Goods) Mr Sameer Barde told PTI.
Given the current political reality, they will need more support from their allies, he added.
The government that opened the country’s $450 billion retail sector to foreign investment by allowing 100 per cent FDI single brand segment was hoping to allow up to 51 per cent FDI in multi-brand category.
Last November, the government had beat a hasty retreat on its decision to allow 51 per cent FDI in multi-brand retail after ally Ms Mamata Banerjee’s Trinamool Congress opposed it tooth and nail.
The Congress has bitten the dust in three states, including politically crucial Uttar Pradesh, out of the five states.
“After the poor performance of the Congress in the latest elections, the risk taking appetite of the UPA would further go down. My view is that now nothing will happen on FDI in multi-brand before 2014,” DLF Brands Chief Executive Operations and Strategy Mr Dipak Agarwal said.
He said even the move to allow 100 per cent FDI in single brand retail will not have many takers because of the 30 per cent sourcing clause from small and medium enterprises.
“Overall it is a bad news for the industry,” he said, adding the Congress’ bad performance in the elections has made the situation even more complicated.
“It appears that Congress does want to go forward with the reforms but the question is how well will it be able to maneuver given the political conditions,” Retailers Association of India CEO Mr Kumar Rajagopalan said.
The issue of opening the multi-brand retail to FDI is still a political dilemma than a commercial one, he added.
“We have to see what stand the new government in UP takes on this,” Mr Rajagopalan said.
However, JK Paper Managing Director Mr Harshpati Singhania said the assembly elections results will not come in the way of reforms.
“Personally I don’t think that the assembly elections results will have an impact on the policy reforms of the Centre. I hope it doesn’t. Our main concerns are of economic nature while political situations will keep varying,” Mr Singhania said.
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