It was a case of politics prevailing over policy reforms as far as India’s booming retail sector was concerned in the year going by, although that did not deter companies from going ahead and expand their operations.
Just when corporate India thought that the much-awaited opening up of multi-brand retail to FDI would see the light of the day, political compulsions meant that Prime Minister Manmohan Singh had to eat the humble pie.
He had to put his government’s plans of allowing 51 per cent FDI in multi-brand retail and 100 per cent in single brand on the back burner.
Amid all the drama, the year 2011 saw online retailing make its presence felt with newer players jumping on the bandwagon.
The highlight of the year in the retail sector, estimated to be around $450 billion and growing at around 15 per cent, was clearly the cabinet’s decision to allow 51 per cent FDI in multi-brand retail and 100 per cent in single brand retail in November.
The decision was welcomed by both domestic retail players, including Future Group, Reliance Retail, Shoppers Stop and Aditya Birla Retail, and foreign giants such as Walmart, Tesco and Carrefour.
The celebrations, however, did not last for long as in the absence of a political consensus, with UPA ally Trinamool Congress one of the most vociferous opponents, the government was forced to hold back its decision. It, however, gave an assurance to take it up at a later stage.
The tug of war between the government and corporates on one side and the Opposition and small traders on the other, meant that the final word on the issue is far from being said.
“This stance on FDI has left many in modern retail wondering if the government does have the grit and determination to propagate consumption in the country when the world is reeling under recessionary pressure,” Retailers Association of India (RAI) CEO Mr Kumar Rajgopalan told PTI.
India currently allows 51 per cent FDI in single-brand retail and 100 per cent in cash-and-carry, but does not allow any foreign investment in multi-brand.
Besides the FDI issue, the sector overall saw growth as most retail companies continued to expand their operations by setting up new stores. Most players witnessed healthy sales across the year, particularly during the festive season.
During the first half of the year, most retailers were on an expansion spree.
According to estimates of research firm CB Richard Ellis India, over six million square feet of retail mall space was added across India in the first six months of 2011 alone.