Clarifications offer nothing new; reiterate govt stand: BMR

The clarifications announced by the Cabinet regarding FDI in multi-brand retail offer nothing new and only reiterate the government’s stand announced in September 2012, says Vivek Gupta of BMR Advisors.

Speaking to CNBC-TV18, Vivek Gupta adds that the ban on multi-brand retail trading via e-commerce does not hinder companies like eBay or Amazon.com from operating in India. The analyst says that the ban on sourcing fresh farm produce reiterates the government's focus on the processed food industry. Below is the edited transcript of Vivek Gupta reaction on CNBC-TV18 Q: What is your view on the government clarification that forbids multi-brand retail trading by way of e-commerce?
A: The government’s clarification on not allowing multi-brand retail trading by way of e-commerce by itself does not rule out investments in marketplaces, where, by definition, what eBay or the new Amazon site allow Indian retailers to sale their wares on their websites.
They are only providing a platform on which retail trading by Indian companies can take place. The marketplace model is not a violation of the e-commerce retail trading policy because at no time does the entity in which there is foreign investment indulge in any form of retail trading. They are only providing a platform on which other retailers can sell. Q: Companies like Tesco were very keen that the farmer be included as a pivot in the government’s multi-brand retail policy. The government does not seem to have paid heed to that suggestion and it has made it absolutely clear that fresh produce will not be covered in the 30 percent sourcing requirement. What is your view?
A: In terms of the clarifications, the government has only reiterated its entire policy. The government has made no concessions and that is why agricultural or farm produce will also not be reckoned for this purpose. The government is talking about processed goods only. So, obviously the government does not wish to relax any of the onerous conditions that multi-brand retail traders will have to satisfy and has only reaffirmed the stand that was announced in September. Q: What is your view on the clarification regarding the state government's role?
A: The government seems to have upheld the primacy of the state government in determining the conditions under which multi-brand retail trading will be allowed across the country. So, even those states which have already opted for inclusion in the FDI policy which have been already notified will presumably have the rights to specify additional conditions for front-end retail stores to be opened.
The Centre has, interestingly, also said that if any foreign investor approaches the state government not included in the list of states supporting FDI, then the state-governments can give its consent and automatic amendments to the policy will be made by the central government.
So, any company who wants to set up stores across the country will have to open up simultaneous discussions with the Union as well as the state-governments.