Blanket ban on FDI in retail — Didn’t see that coming
That was a shocker wasn’t it. Or in cricket parlance a ripper or a googly. In baseball it is called as a curve ball. But in investment parlance it is called a blanket ban. Not sure we are going back or forward but the parliamentary committee has recommended a blanket ban on FDI in retail.
A blanket ban should be imposed on domestic corporate heavyweights and foreign retailers from entering into retail trade in grocery, fruits and vegetables,” the Parliamentary Standing Committee on Commerce said in its report on Foreign Direct Investment (FDI) in Retail Sector. (Hindustan Times)
Good news is it is still a recommendation. Bad news is we never know what our politicians can do. Bharti Airtel and Wal Mart has one cash and carry business starting up. Metro of Germany has one too.
Indian retail industry is at $356 billion growing at 10% per annum. Organized retail is estimated to be around 6% of that. That 6% is an issue if foreigners and the biggies enter it. It can grow beyond 6% but now it might not.
When wal-mart came into smaller towns many of the mom-and-pop stores have vanished and few innovated their way out of it by becoming an exclusive stores. Our policy makers fear the same could happen in India. The whole episode is to protect small store owners or kiranas.
The ban is even extended to the big corporate heavyweights (read Bharti and Reliance) to trade in grocery, fruits and vegetables. That would rule of Reliance Fresh from the Reliance stable and Bharti’s cash and carry stores. Need to see the fineprint but what is the definition of big here?
Will the Future Group be exempted as they were one of the first in the business? Does this mean only stores like Subhiksha will survive?
Now I am convinced that I am thoroughly confused.
This FDI ban confuses me with the agenda or the laundry list we have seen in the past. On one side we are talking about divesting stakes in PSU’s and the other side we are banning foreign investment turning protectionist.