Friday, November 25, 2011

Coming soon: World’s top retailers

Cabinet Clears 51% FDI In Multi-Brand Stores, 100% In Single-Brand


New Delhi: After debating the issue for more than a decade, the government on Thursday threw open the multi-brand retail segment to leading foreign chains such as Wal-Mart, Carrefour and others in a move to attract overseas investment and dispel doubts about the coalition’s ability to push through big-bang reforms. 
    After nearly two hours of discussion on Thursday evening, the Union Cabinet decided to allow for
eign retailers to hold 51% stake in the multi-brand retail sector and also raised the cap on the singlebrand segment to 100%. The decision, which will be formally announced on Friday, comes with several riders, including one that restricts its application to only 53 cities that have a population of 1 million or more. 
    The investment needed for entering the sector has been put at $100 
million, 50% of which should be set 
aside for building back-end infrastructure such as cold chains and 
warehousing. Further, to make the move politically palatable, the government has made it mandatory for foreign retailers to source 30% of their requirement from small 
and medium enterprises. 
COMPANIES WILL HAVE TO Invest $100m or more Open stores only in towns with population of 1 million or more, ie they can tap 53 urban centres At least 50% investment to be in 
back-end infrastructure like warehouses, cold chains 
    States will have final say as stores have to comply with local legislation 

ARGUMENTS FOR FDI IN RETAIL Consumers to save 5-10% Farmers to get 10-30% higher remuneration Potential to add 3-4m new jobs; another 4-6m jobs in logistics, contract labour, security etc 
To help develop logistics and cold chains 
Govt revenues to go up by $25-30bn through various taxes 

ARGUMENTS AGAINST Could drive kirana shops, local retailers out of business 
Jobs may shrink; at best move from unorganised to organised sector 
Farmers will be left at mercy of big chains, having burnt bridges with mandis 
Flood of cheap imports as retailers hunt best bargains 

WAITING IN THE WINGS Wal-Mart, Carrefour, Tesco, Metro AG 

with thanks : TOI : link above for more details.

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