Ban on multi-brand foreign retailers likely to stay

July 8th, 2008 - 8:18 pm ICT by IANS  

A file-photo of Manmohan Singh

New Delhi, July 8 (IANS) The ban on foreign investment in multi-brand retailing, which has kept global players like Wal-Mart and Carrefour from committing some big-ticket investment in India, is likely to continue, despite the emergence of a fresh political dispensation, experts said Tuesday. The Left parties, which withdrew support to the Manmohan Singh government Tuesday, have been the most stringent opponent to foreign investment in the retail sector, saying it would have a negative impact on small trade and mom-and-pop stores.

India does not allow any foreign investment in multi-brand retailing, but the Left’s decision to break away from the ruling coalition has now paved the way for global players to enter this sector.

However, domestic retailers don’t see this happening in a hurry.

Rather, many feel the government may even set up a regulatory authority for organised retailers to protect small shop-owners.

“The chance of the government allowing 100 percent foreign investment in multi-brand retail is rather bleak,” said S. Shashikanth, a vice-president at domestic retail chain Subhiksha.

“It has a larger political implications and I don’t think that in the current political situation the decision will come so smoothly,” he told IANS.

Shashikanth said the ruling coalition’s new ally Samajwadi Party was also opposed to foreign investment in multi-brand retailing, and added: “Even though the Left has withdrawn support, the road for multinationals in retail is not smooth.”

Incidentally, opposition is not just directed towards foreign investors but also big domestic companies such as Reliance and Spencer’s. Even some Congress party leaders, such as its general secretary Margaret Alva, have said the mall culture is damaging neighbourhood provision stores.

“The small kirana (provision) stores are being swept away by the mall culture, as they are not able to match the scales of production, finance, sales and advertising of the big retail stores,” Alva said at a FICCI Ladies Organisation (FLO) function Monday.

“Today we are facing one of the most difficult periods in trade, industry and commerce. Doors of the country have been opened and we have to face challenges from anything and everything that is being dumped in the country,” she said.

In view of protests from traders against organised retailing in several parts of the country, the centre instituted a study to assess the impact of organised retail on small stores.

The study by the Council for Research on International Economic Relations (ICRIER), a non-profit policy research institute, said the retail business in India is estimated to grow at 13 percent from $322 billion in 2006-07 to $590 billion in 2011-12.

Out of this, the unorganised retail sector alone will generate $496 billion, said the report released last month.

“Retail is a large sector with huge growth potential. There is enough room for both organised and unorganised players to coexist in India,” said Bijou Kurien, president and chief executive of Reliance Retail’s lifestyle division.

The government allows 51 percent foreign investment in single-brand retailing such as that of sports gear major Reebok or fashion brand Louis Vuitton.

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