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Cloud over joint venture with Tesco if BJP comes to power

Tuesday, 8 April 2014 - 10:25am IST | Place: Mumbai | Agency: dna

The Bharatiya Janta Party (BJP) manifesto on Monday that opposed foreign direct investment (FDI) in multi-brand retail sector has come as a shocker to many retailers which were looking for foreign tie-ups.

Just last month, Tata Group's retail venture Trent Ltd finalised an equal joint venture with Britain's Tesco that would have seen an investment of $140 million.

The Trent-Tesco joint venture could very well go for a toss if BJP comes in to power, experts said.

When contacted, Trent Ltd did not offer a comment. Tesco officials could not be reached.

On the other hand, experts said FDI in multi-brand format was a non-starter anyway so BJP's decision to oppose the same should not really impact the industry as there was hardly any action on the ground.

This was because the multi-brand retail FDI policy announced by the UPA government came with a bunch of riders thereby keeping potential investors at bay.

Harminder Sahni, founder and managing director, Wazir Advisors, said, "The FDI policy doesn't encourage any foreign retailer to make investments in India. In fact, I think whosoever forms the new government in the country will have to rewrite the policy (FDI) from scratch to make it more meaningful and effective."

Some said FDI in retail is not a big issue as of now and that policy makers are forced to include it in their manifesto.

"Political parties just don't care about FDI in retail and are just using it as a bait to attract votes," said a retailer requesting not to be quoted.

Industry body – Retailers Association of India (RAI), said the (BJP) manifesto has looked at the larger picture in retail and contains plans to modernise the industry. While Kumar Rajagopalan, chief executive officer, RAI, said it's difficult to comment on the BJP's retail FDI policy, he sees the manifesto as extremely positive of the sector as a whole considering there is a plan to modernise retail in India.

"The manifesto also talks about taking all necessary steps to protect the interest of retailers while also equipping them with latest techniques and methods to modernise and be competitive in the market.

Retailers are facing the issue of multiple licences for starting the business and the manifesto talks about helping with this matter thus ensuring retailers don't have to spend too much time and money there," said Kumar.

The central government, in September 2012, had announced the FDI policy on multi-brand retail saying is likely to strengthen the retail capabilities by attracting foreign investments.

The appropriate implementation of the policy was expected to address a number of supply side constraints pertaining to the infrastructure related aspects of the retail segment in India while better retail access was also likely to provide consumers with wider product choice and rationalised prices. "However, on account of stiff political opposition in India, foreign multi-brand retailers are in a wait-and-watch mode till the time there is sufficient clarity about the economic policies of the new government post the general elections," CARE Ratings had said in a March 28, 2014, report.

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