'FDI caps making India less attractive'

Franchise business to account for 50 per cent of organised retail space

US companies are looking forward to lifting of foreign direct investment (FDI) caps in insurance and other sectors besides relaxation of restrictions on the multi-brand retail business in India, according to Nicole Y Lamb-Hale, assistant secretary for manufacturing services, US International Trade Administration.

Caps make India less attractive as an investment destination for prospective FDI flows from the US, she said here on Wednesday, adding the officials of both the countries had been holding meetings in New Delhi on these and other issues that would help promote increased US investments into the country.

Nicole is on her first franchising trade mission to India, accompanied by some 15 US companies. Hyderabad is the first of the three stops. They would be visiting Mumbai and Delhi later to meet with local government authorities and prospective Indian partners for franchise businesses.

She said the US was hopeful of likely changes in India’s FDI policies while citing the recent introduction of insurance Bill in Parliament that proposes a hike in FDI in the sector. “We are not particular on any one single sector, but would like to see changes in all important sectors, including retail,” she said.

On the franchise business, she said the Indian market was ripe for a franchising boom. Currently, the franchise market in India is estimated to be about $3.3 billion and growing at a rate of around 30 per cent. Over 700 franchise systems are already operating in the county and approximately 10 per cent of these are run by international companies, according to her. Going forward, franchising is expected to grow its share within retail until it represents 50 per cent of the overall organised retail trade.

Food joint Subway, a US franchise brand, opened its 200th outlet here today. “It has been six years since I entered into a franchising partnership. I have developed 28 Subway restaurants, 25 in Hyderabad and three in Visakhapatnam. Another 10-12 locations are in the pipeline,” Sandeep Shah, development agent, Subway Systems India Private Limited, said.

US exports to India last calendar year stood at $19.2 billion. This would have crossed the $20 billion mark had there been no dip in export of aircraft, according to her.