The Indian government which recently permitted 51 percent foreign direct investment (FDI) stake in multi-brand retail, while welcomed by the apparel brands and retailers, is being opposed by a few key political parties.
Crisil Research in a report released yesterday said, "The move to allow 51 percent FDI in multi-brand retailing will attract investments of US$ 2.5-3 billion in the sector in next five years, primarily into the food and grocery segments".
Most of the brand consultants, apparel brands and retailers, fibre2fashion spoke to welcomed the move. A few however were worried over the ambiguity or lack of clarity on the 30 percent local sourcing clause.
This move by the government can create around 4 million direct jobs and almost 5 to 6 million indirect jobs, which includes contractual employment within a period of 10 years, says the Indian Staffing Federation (ISF) an apex body of the flexi-staffing industry.
"It is expected that the impact of the FDI in retail will have a much wider impact on organized employment than what happened in the IT sector 12 years back as it shall open doors for less skilled and less educated people as well. The impact shall be far and wide and all across the country," it added.
Mr Punit Agarwal of Promart Retail – a new discount chain, opines, "The retail industry will see a growth of 20% and the policy signifies a positive outlook for the sector. It will be a powerful catalyst for the growth of retail and will definitely boost sentiments and revive the overall economy of our country".
Mr. Vinod Gupta - CMD of Kolkata based innerwear brand – Dollar considers the policy will boost employment and also streamline all channel sources. Livelihood and productivity will increase at the source level. While, once there is improvement in the process of sourcing, all further aspects in a business will strengthen too."
Mr Nischal Puri - CEO of Brandis India, which provides consultancy to new innerwear and garment brands explains, "It is an opening up of multiple growth opportunities. Since banks are wary of lending to the retail industry, this move could come in as a shot in the arm for entrepreneurs who would like to enter the retail trade.
"Retail will get the freedom to go beyond domination of big corporate houses. New entrepreneurs will get an opportunity to get into organised retail riding piggyback on FDI in retail. Secondly, share of organised retail could touch 15-20 percent in a few years from the 7 percent currently.
"Lastly the growth that organised retailing achieved in ten years, will now be possible in five years due to this decision. The benefits of this policy will also trickle down to tier II and III towns and cities rather than the eight metros", he wound up by saying.
According to Mr Abhay Gupta – Director of Luxury Connect which is instrumental in bringing luxury brands like Gianni Versace, Corneliani, John Smedley, etc to India, it is a bit too early to comment on the impact on the luxury sector.
He is apprehensive of the 30% local sourcing clause which could be a stumbling block to attract new FDI investments in the sector. However he expects a lot of investment to come in the FMCG, food and premium goods segment.
He said, "The electronic media has reported that the government might impose the 30 percent local sourcing clause on a case-to-case basis, which is a bit worrying for me. A lot of global luxury brands are waiting and watching the developments".
Mr Surya Narayanan – MD of Chennai based – Celebrity Fashions Ltd – a garment exporter and also which manages a clothing brand – Indian Terrain too is apprehensive about the ambiguity in the policy. However he is of the opinion that it will create a lot of employment opportunities.
He expects that it will take between 6-9 months for the first FDI investment to come in, except in the case of Wal-Mart which already is in a JV with the Bharati Group in India.
Other experts, fibre2fashion spoke to and who did not want to be named said that the actual impact of the decision will take at least 3-4 years to trickle in as it cannot be expected that global retailers will make a beeline, as a good amount of FDI will be spread over a period of 3-4 years.
