According to Rajan Divekar, senior director at Deloitte India, retailers in the domestic market as well as international players have adopted a wait-and-watch policy after the recent controversy surrounding the entry of FDI in multi-brand retail. Most of these players have been cautious in terms of committing to fresh investments, according to Mr Divekar.
Other factors that have led to the slowdown of the sector include high degree of trade protection, uncertainty over the future of the FDI policy and the continuing regulation of the labour market.
Mixed response
Domestic retailers continue to have a mixed approach towards FDI in multi-brand retail. While some fear for the small retailers, some believe that the move will transform the sector in the long run.
Anirudh Dhoot, director of Videocon and president of CEAMA[i], said, "I welcome the decision of 100% FDI in single-brand retail and I am hoping that FDI in multi-brand retail will follow soon. With large retail giants entering India, it will surely boost our economy. International retailers will bring along their technical knowhows, which will surely help in a big way. Furthermore, the 30% sourcing policy from India will help the Indian economy largely. Luxury brands will be slightly less expensive too if manufactured in India. Most importantly, there will be many job opportunities created and this will boost employment in the country. Customers will also be benefited as they will get a variety of options to choose from. Overall, this is a very good step forward and should be taken positively."
The Deloitte report too supported the entry of 51% FDI in the multi-brand retail sector and said that it is likely to have a positive impact on the sector as well as on the Indian economy as a whole.
Tias Chakraborty
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A recent report by Deloitte indicates that the outlook for the Indian retail sector is somewhat cloudy due to the effects of the high inflation rates and the decision of the government to hold back FDI in multi-brand retail. However, the report named ‘The 2012 Global Powers of Retailing’ added that there is a silver lining for the sector as the moderation of the prices would ensure higher margins in the days ahead.
