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Indian Retailers Concerned over GOVT’s Retail FDI Policy
| June 20, 2009 |  (Be the first to rate this story!) Loading ... |
With Ikea dropping its India plans and a Parliamentary Standing Committee report opposing the entry of heavyweights into the retail trade, Indian retailers looking for foreign tie-ups are in a cautious mood. Faced with the double-edged sword of slowdown and Government policies restricting stake dilution, retailers and market analysts observe that foreign inflow and technical know-how, crucial to the business, could be hampered, if the Government does not act proactively soon. “It is not a zero-sum game. Indian retail needs a lot of funds to establish itself. Foreign players are keen on more control than what they are currently offered. At this juncture, the retail sector has to be supported by Government initiatives and not otherwise,” industry sources said.
The Parliament Standing Committee on Commerce in its report ‘Foreign and Domestic Investment in Retail Sector’, too, has demanded a blanket ban on domestic corporate heavyweights and foreign retailers from entering retail trade in areas such as grocery, fruits and vegetables. It also sought restrictions on their opening large malls to sell other consumer products. An Ikea official was quoted as saying, “We would have liked the government to allow 100 per cent FDI in retail. As it was not in the offing, we shelved our India plans.” A senior industry expert says there are many misconceptions about retail. It is not clear whether parties are opposing foreign direct investment or modern trade itself. FDI is essential as it will bring liquidity and infrastructure into the system, he believes.
A recent KPMG report also points out that the slowdown has affected sales. “Slowing sales resulting in lower inventory turnover and increasing working capital requirements to fuel growth have resulted in liquidity pressures for many domestic retailers. “Companies have been trying to reduce the inventory and shorten working capital cycles,” said Mr Ramesh Srinivas, National Industry Director – Consumer Markets, KPMG in India.
News Published Under: Retail Market in India |
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