US retail chains won't give up on multi-brand FDI

Plan to keep lobbying for opening the format to FDI, by using inflation-busting and more-jobs argument

American businesses have not given up on India allowing foreign investment in multi-brand retailing, even after the new government led by Prime Minister Narendra Modi maintained it was opposed to the policy cleared by the earlier regime in 2012.

The US-India Business Council (USIBC), representing 350 US companies with business in India, seems sure foreign direct investment (FDI) in multi-brand retailing will not be stopped by the government.

Some of this confidence stems from the fact that UK chain Tesco is moving ahead with its multi-brand plans in India with partner Trent, a Tata Group company. Tesco is the only foreign multi-brand retailer to have made a proposal to invest. The government has indicated the present policy, on allowing up to 51 per cent FDI in multibrand retailing, might not be reversed. Tesco had applied and was cleared by the Foreign Investment Promotion Board before the government took charge.

“The USIBC is encouraged by Tesco’s decision to enter India and we are watching their progress closely,” Patrick Hayden, director of policy advocacy, food & agriculture and retail trade, USIBC, told Business Standard.

Hayden said the council would continue to make this case to the government. “A successful opening by Tesco will bolster that.”

The US has some top retail chains of the world. Besides Walmart, the largest in the world, there are Kroger, Costco, Walgreens, Home Depot and Target. Walmart is present in India but not in multi-brand retailing.  Walmart has stayed with the wholesale format, where up to 100 per cent FDI is allowed.

“Walmart is committed to India and the market,” said a spokesperson. “We plan to add 50 stores in four to five years.” Its e-commerce pilot for business customers is launching in July. The US businesses would take up FDI when Modi visits the US later this year, and also before that. They are expected to try to convince the government that FDI would help curb inflation and result in more jobs. “We are confident the Indian government under the Prime Minister will be thinking on the same outcome-based approach,” said Hayden.
PRAYING FOR CHANGE

• 350 US companies with business in India, represented by USIBC, seem sure FDI in multi-brand retailing will not be stopped by the Modi government
• 51% FDI in multi-brand retailing allowed. Centre says policy may not be reversed
• 100% FDI is allowed in the wholesale format. Walmart has stuck to this format