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Four Seasons: Serve the Reserve with Food

Posted: Monday, 24 October 2011 11:29

FDI Retail Sweet Dream Ends

Oct 24: As had been perennially voiced by delWine, the Government seems to have dropped its plan to open up FDI in multi-brand retail thereby ending the sweet dream of global retail corporate players like Wal-Mart, Tesco and Carrefour who are already into wholesale or back office business, at least for the moment.

According to a report published by Hindu Business Line Mr Thomas Varghese, Chairman of the  National Committee on Retail of CII (Confederation of Indian Industry) that according to the latest developments in the Government the matter has been put on the back burner, opining that it was unlikely to happen now.

The Indian Retail is worth about $450-500 Billion in size. FDI (Foreign direct investment) is not permitted in multi brand retail in India. However, single-brand outlets are allowed up to 51 per cent foreign investment. In wholesale, or ‘cash and carry' business in which the German Metro was the first to enter 100 per cent FDI is allowed.

It may be recalled that at a recent luxury brands summit organised by the CII in Delhi, the Minister of Commerce and Industry, Mr Anand Sharma, made an announcement that the 51 per cent FDI cap on single brand outlets would be hiked.

An official in the Ministry of Consumer Affairs, Food and Public Distribution said that after the Committee of Secretaries gave its recommendation on opening up of multi-brand retail, it was up to Department of Industrial Policies and Promotion (DIPP) to circulate the note to the Cabinet (like the one sent by the Ministry of Food Processing Industries to get India to join OIV) I the and  that they had not heard anything from there.

As one of the reasons advanced by delWine the government and most of the senior ministers  seemed to be convinced about the benefits of allowing FDI as was voiced even by the Prime Minister in the nineties before he joined politics, this appear to be a step to keep the  retail trade on its side with the Government treading on thin nice, politically with several recent setbacks. Intern-Ministerial Group IMG) had also recommended the opening of FDI in multi-brand retail to contain inflation.

However , last Thursday, the Chairman of the Economic Advisory Council to the Prime Minister  Dr C. Rangarajan, reportedly turned down this recommendation of the IMG to allow opening up multi-brand retail. The IMG had advocated opening up of FDI in multi-brand retail. Dr Rangarajan questioned the motives of the MNCs and wondered how many of these aspirant  companies would be really interested in setting up contact points for the farmers”.

For our earlier relevant article in March 2011, in which we had warned that the government may not allow it, despite the strong pressure from the foreign chains, click

FDI Retail an Unending Sweet Dream

or
FDI in Retail still a Dream

What Sunil Mittal had said after signing a back-end operation deal with Wal-Mart had said in September 2007 holds true today. He had said, "Let us see for the next 7-10 years what Indian companies deliver and then we can take a call."

FDI in Front End Retail to Wait Says Sunil Mittal

By no means, the issue may be considered ‘dead.’ Surely the lobbyists would continue their efforts. Ironically, the wine retail would suffer a potential loss of sales of wines. Despite the expected pressures on suppliers and producers, consumers would be still benefitted and the wine industry is expected to gain- editor 

       

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