FDI in retail: Experts call for more than ease in approvals to boost investment


July 17, 2013

Farah Bookwala, CNBC-TV18 / Moneycontrol.com

Mumbai, July 17, 2013

The government is making yet another push to attract FDI in retail.

The Prime Minister on Tuesday relaxed norms by allowing 49 percent FDI in single-brand retail under the automatic route.

While this may improve sentiment in an industry marred by regulatory hurdles, CNBC-TV18’s Farah Bookwala reports that analysts call for measures more powerful than the hike in FDI limits to boost overseas retail investment.

The government may have eased single-brand FDI norms on Tuesday, but not too many are left impressed. Prior to the Prime Minister’s meeting held on Tuesday evening, every single-brand retail proposal had to be ratified by the FIPB. Now, the government will allow foreign retailers to make an equity investment of upto 49 percent in a single-brand venture through the automatic route without requiring the FIPB’s nod.

But analysts say this alone is unlikely to convince foreign retailers who have refused to jump into the fray so far.

Devangshu Dutta, chief executive, Third Eyesight, says, "I doubt it will make significant difference to plans of foreign retailers. From a foreign retailer’s point of view, anything above 26 percent and below 51 percent means the same thing from the point of view of control."

Others add that while it is now easier to step into the Indian market without the FIPB’s nod, seeking its approval was never really a concern for global retailers.

Pinaki Ranjan Mishra, national leader — retail, EY India says, "The assumption that seeking an FIPB nod is a negative thing is wrong. I haven’t heard of anyone saying going to government and seeking approval is bad. But that’s not the real problem for foreign retailers. What they want is relaxation of norms that are not practical to business. So though attempts are being made to address the issue, the real problem lies elsewhere."

Most analysts reckon that foreign participants who are serious about entering India will eventually find a way to get here in the next couple of years. But if the government wants to attract mega bucks , it has to not only simplify norms for multi-brand retail, but also do away with the distinction between single and multi-brand retail.