Retail industry experts say that the Supreme Court’s ruling will have little or no practical consequence on companies wishing to make an investment into India.
Supreme Court which refused to stay FDI in retail sector had said the Government policy suffers from lack of legal sanction. It, however, said that it could be “cured “by amending the regulations in the Foreign Exchange Management Act by the RBI”.
“Retailers need not worry as there is hardly any practical implication for companies wishing to invest in India. It is a curable problem meaning it is merely a technical issue,” Paresh Parekh, Tax Partner, Retail and Consumer Products, Ernst & Young said.
The court was hearing a PIL filed by lawyer M.L. Sharma challenging the Centre’s policy on a technical ground that retail trading is strictly prohibited under FEMA for which the power to come out with a circular is vested with the RBI which has not issued any regulation after 2008.
Sharma had said in his petition that retail trading is strictly prohibited under the law of FEMA under which the power to come out with a circular is vested with the RBI which has not issued any regulation after 2008.
Arvind Singhal, Chairman Technopak Advisors, also echoed a similar view. “The Government can bring an amendment and it will solve the problem. It is a routine thing”.
Krishan Malhotra of Amarchand Mangaldas said, “There are no procedural irregularities and foreign investors will not face any issue in terms of investment”.
FIPB meeting on Oct 19
Meanwhile, the Foreign Investment Promotion Board, the nodal body for sanctioning foreign direct investments proposals, will on October 19 discuss investment proposals single-brand retailers that want to set up stores in India.
These include UK-based footwear giant Pavers England and US-based clothing retailer Brooks Brothers.
Brooks Brothers has applied for 51 per cent FDI in single-brand retail while Pavers England has applied for opening wholly-owned stores in India.