Things really didn’t work out with mandatory local sourcing of retail products. That possibly might force a government rethink for multi-brand retailing
Sources said the government is considering permitting foreign supermarket players to open retail stores but only for sale of 'Made in India' products.
With the government likely to ease FDI rules for several sectors including multi-brand retail, Vivek Gupta, Partner at BMR Advisors, said that any reform should be comprehensive rather than incremental.
Currently, foreign companies can only invest only up to 51 percent in multi-brand retail, while there is no cap on single-brand retail.
The company had posted a net profit of Rs 15.01 crore in October-December quarter in the year-ago period, V-Mart said in a BSE filing.
Seeking to make FDI policy simpler, the government on June 8 released an updated compendium by incorporating all policy changes and eliminating unnecessary explanations, but retains the UPA regime's policy on opening of multi-brand retail for foreign investment
The company operates 123 stores at present and is focusing on Tier-II and -III towns for opening stores in the next fiscal.
The ED had begun investigating 14 e-commerce companies like Flipkart and Snapdeal, after a plea in the Delhi HC had alleged violation of FDI norms.
This initiative would increase processing in the country, reducing inflation and creating enough employment opportunities for the youngsters especially coming from farmer families or agriculture background.
The state government is working towards a new multi-brand retail policy and the draft note promises a big boost to both retailers as well as real estate players
"That is unfortunate. For all these years, we have been telling the world that whatever be the level of political differences, there is a broad consensus on economic reforms among the major two parties on a wider spectrum. Such a premise does not seem to be holding good any more," Assocham President Rana Kapoor said.
Although the current foreign investment policy permits 51 percent FDI in multi-brand retail, the BJP government is not supportive of bringing any foreign investment in this sector.
"There has not been progress in FDI in multi-channel (brand) retail as well as web-based (e-commerce) retailing in which we hope to see more progress on," said US Under Secretary of Commerce for International Trade Stefan M Selig.
It is difficult to predict where competition will take Indian retail, but clearly the delayed entry of Wal-Mart has allowed new retail ideas to flourish. It has benefited online retailers and sidelined the brick-and-mortar retailers.
Global retail giants like Amazon wants India to relax the foreign investment norms in e-commerce space. India's Foreign Direct Investment (FDI) policy restricts e-commerce companies from offering services directly to retail consumers.
A multi-structured deal on the basis of share swap is being worked out between the two partners, post which Kishore Biyani-led Future Group will become the majority partner, according to sources.
Jaitley maintained that the BJP's position remains the same on multi-brand retail FDI and his position was also the same. He was replying to a query on Walmart and other retail giants wanting India to re-think on multi brand retail and whether there was a room for rethink.
"In India, we see a big, like-mined economically powerful ally in India," said Rossow, who also raised concerns at the massive trade deficit between the two countries.
In January 2012, India raised the FDI cap in single-brand retail to 100 percent from 51 percent. Around 18 proposals worth USD 173 million were approved between April 2010 and May 2013, as per the government data.
However, government officials tell CNBC-TV18 that this does not fly against the Modi government's stand of FDI in multi-brand retail. They say FDI has always been allowed in the duty-free shop segment, as technically, these shops do not fall under the ambit of Indian customs.
"Apart from predatory pricing the online retail companies take undue advantage of the wide variation in sales tax and local taxes by operating from low tax geographical regions," Consumer Electronics and Appliances Manufacturers Association (CEAMA) said in a statement.
Reports suggest that DIPP has proposed foreign direct investment (FDI) ceiling of 51 percent in multi-brand retail be made composite cap.
Jaitley said he would prefer to lower fiscal deficit by boosting revenues rather than cutting down on expenditure.
In the sixteen months since the United Progressive Alliance (UPA) government opened the door to foreign direct investment (FDI) in multi-brand retail, only one foreign investor has shown serious interest- British retail giant Tesco has decided to partner Trent Hypermarkets, a Tata Group company.
The Cabinet in September 2012 had approved up to 51 percent FDI in multi-brand retail, while empowering states to independentally decide if they want to let international chains set shops.
