Retail heavyweights extract concessions from Govt.
By R. Chandrasekaran
CHENNAI: In a clear case of exerting pressure on Indian government to get more concessions and taking advantage of the country’s need to have a solid balance of payments position in the face of a slackening Indian currency, the U.S. retail heavyweights seemed to have extracted major concessions on the multi-brand retail sector.
Though there were no details available on the easing of measures of foreign direct investment (FDI), a cabinet minister has reportedly told the press that the government has relaxed investment norms in the retail sector in a bid to attract world’s biggest retail companies such as the U.S.-based Walmart Stores and Tesco.
The latest developments follow Finance Minister P Chidambaram’s indication yesterday that it will come out with more clarifications on relaxing norms of FDI for the multi-brand retail sector.
It is no secret that the government’s efforts to attract big FDI in retail sector has failed to yield the expected results with most of the global retail companies shying away from entering India for variety of reasons. One such reason is the fear that if there is going to be change of government in 2014 after the Parliamentary elections, there could be a review of FDI policy in retail sector as has been voiced by some political parties in a bid to win over votes.
Only a few days back that there were reports of India considering the concerns expressed by Walmart on the question of sourcing issue. The officials of the U.S.-based retailer reportedly met government authorities recently and explained its inability to comply with the sourcing clause announced by it for the multi-brand retail sector. At least 30 percent of the procurement is required to be made from small industries, which was apparently done to appease the small scale sector, who have expressed their apprehensions of losing their livelihood.
The American retailer is said to have been ready to source only up to 20 percent from small industries. However, it is not a surprise to the policy makers since more number of global retail giants felt the thorn in sourcing clause.
It is almost a year since the government announced the opening up of retail sector to the FDI, in September last year, but could get only one major FDI proposal, from. IKEA. All the other big retailers expressed their keenness in Indian market, but failed to make any proposal to the government for its clearance. The government is now forced to make more concessions in order to protect the Indian currency and attract big inflows of USD to address the balance of payments position.
To contact the author, email to rchandrasekaran@americanbazaaronline.com