Expect nothing major in FDI in retail before elections: JSA

To the government’s clarifications issued on Thursday on FDI in multi-brand retail, Sajai Singh, partner, JSA said that these are just clarification, not something new that has come up.

Talking to CNBC-TV18, he says that the government has taken a very bold step in opening up multi-brand retail for foreign investment, and to expect anything major or more dramatic in that space very soon or before the elections next year would be expecting too much. Below is the edited transcript of his interview with CNBC-TV18 Q: Your quick thoughts on the clarifications that have come in. There seem to be no relaxations that the government has made as far as the multi-brand retail policy is concerned. The government is making it absolutely clear that as far as the 30 percent sourcing requirements are concerned, procurement of fresh produce will not be covered by this condition. It can only pertain to manufactured and processed products. As far as the backend infrastructure is concerned once again, the government making it absolutely clear that the investment in backend infrastructure will have to be in Greenfield assets. It will have to be fresh investment, it cannot be by way of acquisition. They have also gone on to say that franchise route cannot be adopted by multi-brand retail stores. Multi-brand retail stores will have to be company owned and company operated. Those are just some of the highlights. Your quick thoughts what I have just told you about? A: I am speaking on behalf of myself and not on behalf of any of my clients. So, this should not be construed as a statement from any of them. I am sure they will all make their own statements. As a concept the Government of India (GoI) has taken this very bold step earlier on opening up the multi-brand retail for foreign investment. We should be very thankful for that because it has been a major move forward for the country. To expect anything major or anything more dramatic in that space very soon or before the elections next year, would be expecting too much. What has happened or the clarifications that have come up from questions that several retailers have been asking the government. So, it is more like a clarification, more like a setting the stage a little more clear than any change in policy. So, that is really what I am seeing or what I am reading in what has come. Q: Just in terms of the clarifications and I would imagine that this must have been a question or a query raised by Wal-Mart, as the question asked was would a company operating in the wholesale trading and cash and carry trading be considered as a company providing backend infrastructure and efficiently distributing the goods to small retailers and professional businesses. The government has clarified saying, that the wholesale trading and cash and carry trading cannot be considered to be providing backend infrastructure. Foreign Direct Investment (FDI) in multi-brand retail trade will require fresh investments in backend infrastructure. So, for those guy's like Wal-Mart who are operating in the cash and carry business already this will be a disappointment? A: I don’t know whether Wal-Mart asked this question. I won't really comment on any specific retailer. In a sense I was just discussing e-commerce bit with the press in terms of launch of a particular website which is got into what may be considered e-commerce space. Its again in that sense a clarification, whether it has been disappointing or not I won't comment on that. It is something which is bothering people. They wanted to understand the definitions of various terms that are being loosely used and whether they fall within FDI, outside and what are the limitations. So, it is really a clarification, it is not something new that has come up.