The Indian government has once again ruled out the possibility of allowing international multi-brand retailers to enter the country, saying it will stick to the current single-brand foreign investor model. At a conference, Anand Sharma, India’s Commerce and Industry Minister, said there were no plans to liberalise the rules, as the current foreign direct investment (FDI) policy was working well.
He explained, “We had gone in consciously for rationalisation by defining ownership and control and that has helped. We keep on evolving but I do not see any further need for liberalisation”.
Sharma added, “Up to the wholesale point it is all right. In back-end chain, it is important to have foreign equity participation. In the single brand retail, they can also do value addition. That’s what we want to encourage. As for the front-end, the country is not ready as yet because it is a vast social security net that we have”.
The announcement will disappoint major global players who have long being pushing for India to open up its retail sector. However, even groups that are looking to enter the country's wholesale sector may be facing a rough ride ahead, after the government announced plans to change a key factor behind such deals.
Under the plans, the rules will be altered to ensure that wholesale chains set up by foreign retail firms in India only cater to genuine institutional and bulk buyers, and not retail consumers. The draft states, "Wholesale trade would, accordingly, be sales for the purpose of trade, business and profession, as opposed to sales for the purpose of personal consumption".
Currently, determining whether such chains are keeping to the rules is determined by the size or volume of sales, and not the buyer. The move comes as some international groups have been criticised for using their wholesale clubs for direct sales to end-consumers - something that is not allowed under Indian FDI rules.
Namnews - Thursday 5th November 2009
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