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Last Updated : Jan 10, 2018 08:36 PM IST | Source: PTI

Industry hails new foreign capital norms in retail

As per industry estimates, the domestic retail sector is pegged at Rs 1 trillion by 2020 at an estimated compounded annual growth rate of 15 percent.

Industry experts as well as the largest trade body of retailers RAI have hailed the new foreign investment norms for single-brand retail wherein government today allowed automatic approvals for 100 percentforeign capital, as a positive step.

So far, only 49 percent of FDI was allowed under automatic route in singe-brand retail. Investment beyond that level required government approval. Furthermore, local sourcing norms have also been relaxed for a five years.

"We believe the decision to allow 100 percentFDI through automatic route will ease the process for foreign as well domestic brands," Kumar Rajagopalan of the industry body Retailers Association of India (RAI) said in a statement.

As global companies take time to develop good suppliers as partners, the relaxed time frame for sourcing is seen as "conducive" without compromising on the need to be a good sourcing hub for global brands, he added.

Retailers will be able to start operations and will have five years to find local partners and vendors that qualify in terms of quality and price.

As per industry estimates, the domestic retail sector is pegged at Rs 1 trillion by 2020 at an estimated compounded annual growth rate of 15 percent.

Aashish Kasad of EY India described the decision as a progressive step that will help attract foreign investment into the sector.

He, however, said industry is disappointed with no changes in FDI norms for multi-brand retail which his needed to get latest technologies and retail formats. In the long- run, this reform is also expected to boost employment, bring in more products for consumers and help the economy.

Neeti Sharma of TeamLease said the move will result in demand for emerging roles in technical development and support for online retailers, supply chain and logistics, and customer service.

"To meet the increased job demand from companies, it is imperative that we focus on up-skilling the workforce and re-shape the learning and development initiatives," she said.

The decision is also expected to boost the real estate supply for this sector in the near future.

"After a prolonged period of slowdown in the retail sector over the past few years, we saw strong comeback with developers and investors betting high on the sector. Retail saw significant increase in PE investments in fiscal 2017 indicating a significant growth in retail real estate in the coming years and today's decision will further speed this up," Pankaj Renjhen of JLL India said.

With most economic agencies, including World Bank, S&P and Moody's continuing to project over 7 percent GDP growth for the next three years (2018-20), the growth possibility for global retailers is strong here, he explained.

However, Malav Virani of law firm MDP & Partners said the move is positive for only new comers, as for players like Nike, Ikea who are already present here will not benefit much due to the strict sourcing norms, which will continue to act as a deterrent in their faster expansion.

First Published on Jan 10, 2018 08:12 pm
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