Whether it's Carrefour, Ford, or other foreign majors, they are ready to adjust their strategies and design their plans in a way that would address the Indian consumption story.
India's consumption story, combined with the country's rapid growth and economic reforms, is increasingly prompting foreign majors to rethink their investment and business strategies, believe company executives and business analysts.
The India story may have also started pushing overseas brands to reconsider their earlier exit decisions so that they can return to the scene of action, they say.
About a decade ago, in July 2014, when Europe's second-largest retail chain, Carrefour, announced it was shutting its cash-and-carry stores and exiting India after failing to establish a multi-brand business, there was no sign of it making a comeback ever.
However, a few days ago, the French chain announced its re-entry into India through another format, as foreign direct investment (FDI) in multi-brand retail is still a no-go area.
In September 2022, Detroit auto major Ford left India due to tough competition and slow demand during Covid-19.
Earlier this month, the American firm declared it would return to Tamil Nadu to restart manufacturing at the Maraimalai plant, about 50 km from Chennai.
Other foreign brands are also re-entering India or making fresh plans to capitalise on the opportunities the country offers.
Iconic American brand Harley-Davidson, which re-entered last year through a joint venture with Hero MotoCorp, and Chinese fast-fashion major Shein, which is returning through a tie-up with Reliance Retail, are among others on the list.
Gaurav Marya, chairman of Franchise India, says the Indian consumption story is the biggest in the world and cannot be ignored.
Chandrajit Banerjee, director general of the Confederation of Indian Industry, explains that India's large market, fast growth, and successive economic reforms are encouraging foreign investors to explore opportunities here.
According to Madan Sabnavis, chief economist with Bank of Baroda, the combination of India's large size and its paceof growth is a big attraction for foreign majors.
Whether it's Carrefour, Ford, or other foreign majors, they are ready to adjust their strategies and design their plans in a way that would address the Indian consumption story, Marya points out.
As for numbers, India's fast-moving consumer goods sector grew by 4 per cent by value and 3.8 per cent in volume during the April-June quarter compared to the previous year, according to research firm NielsenIQ.
While the data indicated a softening of consumption patterns, the overall commentary was one of stability and resilience.
On Marya's point about foreign brands redesigning their India plans, both Carrefour and Ford seem to be doing that.
In 2014, when Carrefour decided to leave India, it was clear it did not want to waste time in India operating cash-and-carry stores when its goal was multi-brand retail, similar to what it runs across Europe and elsewhere.
A decade later, the chain has announced its re-entry into India through a franchise agreement with Dubai's Apparel Group.
India is part of Carrefour's International Partnership 2026 development plan, which aims to expand into over 10 new countries by 2026.
When Carrefour was exiting India in 2014, it was bullish on expanding its China market.
The chain has almost fully withdrawn from China now.
Ford, too, has a new plan for India. It is expected to make India a hub for exporting electric cars to other markets. This was not the strategy the company was looking at when it left.
Banerjee points out that high-value investment announcements have been seen in sectors such as electronics, renewable energy, and knowledge services, among others.
"During our overseas interactions, we have found remarkable interest among overseas companies to operate in India and we believe that the country is set to see significant FDI inflows as a stable and growing economy," Banerjee says.
Sabnavis agrees. "The government policies have been progressive. Therefore, interest is high."
He cites the potential of the somewhat untapped retail market as a reason for the re-entry of foreign brands.
Growing prosperity in India is also something that companies are trying to leverage.
However, foreign brands have faced many challenges in India, including policy inconsistencies. If Carrefour made an exit, so did others.
Metro, though it operated in an easier cash-and-carry format, left India more recently.
Walmart, which was also keen on multi-brand retail, had to experiment with cash-and-carry business in the absence of a policy clarity linked to FDI.
In 2018, Walmart changed its trajectory to buy a majority in Flipkart in the biggest e-commerce deal in India at $16 billion.
Swedish furnishing major Ikea had its share of many ups and downs while negotiating its India business.
Cupertino-headquartered major Apple, too, waited for several years before getting its partners and vendors to start manufacturing in India.
In a fresh attack on foreign majors, Praveen Khandelwal, founder of the Confederation of All India Traders (CAIT) and BJP MP, said Walmart (Flipkart) and Amazon should be shut down.
He was referring to a probe by the Competition Commission of India (CCI), which reportedly found violations of antitrust norms by Amazon and Walmart.
When asked about foreign majors' India interest, Khandelwal says brands like Carrefour and Ford entering or showing interest in India have significant implications, but they must ensure compliance with the law in both letter and spirit and not damage domestic trade.
"Instead, they should empower domestic trade with technology and expansion," he says.
While admitting that foreign investments bring in capital, boosting economic growth and creating job opportunities in sectors such as retail and manufacturing, he points out the benefits that international brands get from India.
"For brands like Carrefour and Ford, India offers a large and growing consumer base, providing them an opportunity to tap into one of the world's fastest-growing markets."
FDI equity inflows into India, a driver of economic growth, were pegged at $16.2 billion in the June quarter of FY25, a 47.8 per cent increase from $10.9 billion in the same period previous year, according to the latest government data.
Analysts, however, say the room for FDI growth is huge, especially at a time when several multinationals are shifting from China.
Marya says geopolitical influences are there but the overarching theme is that of consumption when it comes to India.
As CII's Banerjee explains, India has taken committed steps to make its investment climate attractive.
"It is emerging as a preferred destination for companies looking to diversify their supply chains, expand markets, and enhance business resilience."
Critics, however, argue that the climate for doing business in India needs substantial improvement, even though there are success stories in electronics and semiconductor manufacturing in the country.
Feature Presentation: Aslam Hunani/Rediff.com
