Though the government might have finally opened up multi-brand retail trade to foreign retailers, it is unlikely that the sector would attract a gush of big-ticket foreign investments at one go. Flat sales growth and the international retailers? usual practice of gradually scaling up their retail operations only means that foreign investment would be slow and conservative in the world?s fastest-growing retail market, at least in the near future.
?Building logistics and the retail network is a completely localised business. It needs time. There is no gainsaying that India continues to be the world?s most attractive retail market but retailers will take time to come, build, operate and scale,? said Pinaki Ranjan Mishra of Ernst & Young.
Moreover, most of the big names in global retail are currently not in the best of health and their woes have been compounded by the ongoing debt crisis in the euro zone and the deteriorating fiscal situation in the US.
?It is a good start and am sure with time it will proliferate. In the process, the country would get the technology, finance and expertise to create solid back-end infrastructure, which is so essential to modern, organised retailing,? he said. The entry of foreign retailers would also enable domestic organised retail chains to develop, he added.
Mittal said that restrictive policies have so long restrained third-party logistics companies from setting up shop in India, whereas globally they control 50-60% of logistics. ?By
deciding to open FDI in retail, the government has encouraged third-party logistics firms to look at India,? he said.
The restrictions put by the government on multi-brand retail are that they have to bring in a minimum of $100 million investment, half of which has to be in back-end infrastructure. Such companies would have to mandatorily do 30% of their sourcing from small and medium enterprises and they can open shops only in cities with a population of 1 million.
Since multi-brand retail stores would be opened in states, many of which are run by Opposition parties still opposed to the move of opening up, does Mittal and his fraternity feel threatened that the measure will not move beyond paper? ?No, certainly not,? said Mittal. ?We would get in touch with all the state governments and political parties and groups who are opposed to the measure and allay their misgiving,? he said.
All fears of closure of mom-and-pop stores and job losses are baseless, he said, adding that the growth of multi-brand retail only creates more jobs. ?A 3,000 sq ft easyday store employs 17 people, so imagine the kind of employment opportunities it throws up for people who are not very highly educated,? Mittal said.