FDI issues: Global retailers wait and watch

Global retail giants, including IKEA, Walmart and Carrefour, are studying the finer details of India's relaxed foreign direct investment norms for the sector as they look to tap opportunities in the country.

In the meantime, while closely watching developments post the changes, these firms are staying focussed on their current operations in India that includes sourcing in case of Ikea, and cash and carry businesses for Walmart and Carrefour.

Welcoming the government's move to allow 100 per cent foreign direct investment in single brand retail, IKEA said: "We will now over the next few days look into the details of the decision and we expect to present more information shortly about our intention to establish retail operations."

India is since long a strong and growing purchase market for IKEA, the Scandinavian furniture retailer said in an e-mailed statement to PTI.

Even French multi-brand retailer Carrefour that has already entered India through the cash and carry route is closely watching the developments.

"Carrefour will remain attentive to the finalisation of this new regulation and continues the development of its cash and carry operations," the company said.

The French retailer currently operates two cash and carry stores in India.

Carrefour welcomes the Indian Government's decision to allow up to 51 per cent foreign direct investment in multi-brand retail, it added.

Echoing similar views, Walmart said it is willing to invest in back-end infrastructure that will help reduce wastage of farm produce, improve the livelihood of farmers, lower prices of products and ease supply-side

inflation.

"We will need to study the conditions and the finer details of the new policy and the impact that it will have on our ability to do business in India," Walmart India president Raj Jain said.

Last week, the government approved 51 per cent FDI in multi-brand retail, while completely opening the single brand segment to foreign investors.

According to sector observers, the foreign retailers will prefer to adopt a wait and watch policy before they make any announcements about their plans in India.

"The picture is not very clear on the multi-brand side, as there is confusion over 30 per cent sourcing from SMEs.

Whether it is allowed to be done globally or only from India," Enrst & Young Partner Tax and Regulatory Services Prashant Khatore said.

Secondly, there is also ambiguity on the number of cities in which these retailers can open stores which is dependent on the veto power of the states, Khatore added.

In case of single brand retail, it would vary from category to category, how companies approach this market.

"Since the 30 per cent sourcing clause also applies to single-brand retail also, there has to be more clarity," Khatore said.

"Looking into the current situation, I do not think there would be immediate rush to open stores here. Possibly people (foreign retailers) would want to wait till the government comes out with a clear document," he added.

As per Federation of Indian Chambers of Commerce and Industry estimates, the Indian retail sector is currently pegged at around $600 billion, with modern retail accounting for about 5 per cent.