PMO’s go-slow on retail may work to Bharti’s advantage

There is little likelihood of the current “policy” on retail trade being rolled back in view of the comments from the Prime Minister’s Office (PMO) last month. At present, 51% foreign direct investment (FDI) is allowed in “single brand” retailing, but players such as Wal-Mart Inc, Tesco and Carrefour are not permitted to invest directly in India since they do not come under the “single brand” retailer tag. Some apprehensions had been raised last month after the PMO asked the Union ministry of commerce to conduct a comprehensive study on the impact of large multinational as well as domestic retailers on local mom & pop stores - about whether the reassessment of the retail sector would lead to a step backwards from the current status of partial liberalization. Highly-placed sources said that there will be no going back on whatever FDI permissions have already been given. Besides single-brand retailers, multinational operators are allowed 100% control of the cash & carry wholesale business as well at present. This assertion of no rollbacks should put to rest speculation about the proposed Bharti Wal-Mart tie-up for wholesale trade, sources said. But till the study (commerce ministry has mandated Icrier to assess the impact of modern format retail on small shops) gets to the bottom of the current debate, further FDI liberalisation may be on hold. And this means the proposal to allow FDI in certain non-core sectors such as electronics and stationery may be put on the backburner. Meanwhile, in a recent letter to the department of industrial policy & promotion, Bharti Enterprises has again clarified that its activities with Wal-Mart would be “in compliance with the FDI guidelines and government policy in this sector and suitable approvals will be sought where required”. Bharti also reiterated in this letter that it expects to commence operations by August-September this year.

Courtesy: EconomicTimes
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