FDI in retail a contentious issue for some

The India Retail Forum 2011 on its first day hosted a lively discussion on the issue of FDI in retail and the issues involved. Participating in the interactive discussion, held at The Renaissance Hotel in Mumbai on September 21, were Abheek Singhi (Partner & Director, BCG), Dr Rajiv Kumar (Secretary General, FICCI), Ajit Joshi (MD & CEO, Infiniti Retail), BC Bhartia (National President, Confederation of All India Traders), Bijou Kurien (President, Reliance Retail Lifestyle), Kishore Biyani (Group CEO, Future Group), Nikhil Chaturvedi (MD, Provogue), Raj Jain (President, Walmart India), Thomas Varghese (CEO, Aditya Birla Retail) and Viren Shah (President, Federation of Retail Traders Welfare Association).

Kumar of FICCI strongly supported opening up Indian multi-brand retail to FDI, calling it a positive game and a win-win situation for Indian as well as foreign retailers. "By 2020, the Indian retail industry will grow by 400 percent. The growth will be such that both single-brand and multi-brand formats will continue to expand and co-exist. There is a fear that large international retailers would import cheaper goods into India due to which the domestic retailers would suffer. This can easily be sorted by regulatory procedures," he said.

Kumar stressed that the benefits of opening up to FDI are quite clear and it is high time that a policy decision gets taken by the government. However, he said it will be at least two years before there is any further movement on the FDI front from the government.

Bijou Kurien of Reliance Retail held similar views. He said that retail is a capital-intensive business and Indian retailers need investment to grow their retail stores. "The Indian government is not going to invest, so both Indian and international companies have to be encouraged to invest in the domestic retail market for growth."

Thomas Varghese of Aditya Birla Retail argued that while capability is important in retail business, funding is absolutely crucial for expansion, which makes FDI desirable. "Investments are needed across the retail supply chain, in technology and other areas of the business, so FDI is something that should be welcomed by all," he said.

Kishore Biyani pointed out that the most contentious issue about FDI in retail is the food business which impacts around 65 percent of the Indian population and care has to be taken about this while inviting foreign investment.

Raj Jain of Walmart India said that while most retailers are looking at FDI as an opportunity to get the much-needed capital into retail chains, but that is only half the story. "While discussing FDI, we only talk about retailers and not about suppliers and consumers. Our supply chains require billions of dollars of investment. If FDI is allowed into India, large investments will flow in not only through retailers but also through supply chains and back-end logistics."

Not everyone was in favor of FDI however. Ajit Joshi of Infiniti Retail said it is not necessary that overseas players will bring in the technological knowhow or a lot of funding. "Foreign players are going through a recession themselves and have been facing domestic problems. It is not certain how much money will actually flow into India through FDI. We are not against foreign investment in retail but Indians have to be cautious. FDI is not a magic wand that will straighten out all the retail issues," he warned.

Nikhil Chaturvedi, MD, Provogue, argued against FDI. "True, India needs capital to increase its GDP, but what is the hurry in allowing FDI when domestic retailers themselves are not given the opportunity to expand? First give them enough opportunity and only then allow FDI in retail."

Viren Shah of the Federation of Retail Traders Welfare Association said that he is not in favor of FDI. "Foreign players simply want to rule the Indian economy. There are lakhs of small retailers who have not been giving any protection against foreign players. FDI will only result in job losses in India," he emphasized.

B C Bhartia of the Confederation of All India Traders questioned the need of FDI. "Foreign players are not coming to India for charity or investment. They are simply coming here for business. When we are doing good as we are, then what is the need to allow foreign players to enter the Indian retail market?" he asked, stating that while people argue that they want FDI in multi-brand retail in India, doors are being thrown open for foreign investment in the entire Indian retail sector.

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