The UK-India Business Council (UKIBC) has urged the Indian Government to revisit FDI norms for multi-brand retail segment in order to attract more investments by foreign companies who have largely shied away from the sector.
India allows foreign direct investment in the multi-brand retail sector with a cap of 51 per cent ownership by international players. The FDI policy, however, also imposes several conditions on foreign players related to mandatory sourcing of goods from MSMEs and investment in back-end infrastructure.
“The initial announcements on multi-brand retail were a step in the right direction. Obviously, politically they were circumscribed by conditionalities and to be frank, we have not seen a huge number of companies, if any, in multi-brand retail particularly in the food sector,” UKIBC Group CEO Richard Heald said.
He maintained that the local sourcing norms are acceptable but the significant requirement in terms of investment in logistics and back-end infrastructure may or may not suit the individual retailers. “So we would like to see a revisiting of these FDI norms and also the conditionality that’s wrapped around it. Having more choice for consumers by encouraging foreign firms to invest in a developing economy like India will add benefits to the rural economy,” Heald added.
The FDI policy is already facing opposition from local traders who fear being thwarted by the increased competition from the international companies.
So far, only UK-based Tesco has received approval for opening stores under the multi-brand retail policy. The Congress-led UPA government had cleared the proposal.
The UKIBC Group CEO believes India remains an extremely attractive investment destination despite the country’s economic growth rate slowing to five-year low of 5.8 per cent during the January-March quarter of 2018-19.
