India Allows Entry of Foreign Retailers
February 3, 2006
INDIA -- The long awaited entry of overseas companies into the Indian retail sector has been approved and a major policy announcement has been welcomed by most of the industry segments. The Indian government is now allowing up to 51 percent FDI (Foreign Direct Investment) in single brand retailing by foreign companies. The policy excludes multi-brand stores but it is indeed a positive beginning and is very likely that it will be opened to others step-by-step like in the telecom or insurance sectors.
Gibson G. Vedamani, CEO of Retailers Association of India (RAI), which represents a number of larger, organized retailers, said, ''Basically two things will happen. Brands, which had hitherto not looked at licensing or franchising, will now consider it as an option and a larger number of joint ventures will take place. Existing retailers will willingly look to converting existing franchises and license agreements into joint ventures. Even China, in its initial stages of opening up its retail sector to FDI, saw more than 300 joint ventures being entered into."
Welspun Retail India is now making its foray into the sector and has also been the franchisee for the multinational brand, Tommy Hilfiger, in India. According to its CEO and Managing Director, Anshuman Singh, Welspun Retail India (also a leading exporter of home textiles) said, ''…..from the earlier franchising arrangements, we will now see joint ventures with equity participation. This is the path for the future and is required in any case…but is a step in the right direction.''
Meanwhile Reliance Industries (Trevira's new owner) has ear marked $850 million into retail business and according to dependable sources they may collaborate and hire specialists in the retail management from the West.
Retail in India is a new phenomenon. The country is decades behind its neighbors Thailand and Indonesia. Malls are built with indigenous know-how, with Indian made goods, which stems from western world retailing concepts such as Tescos or Wal-Mart.
For now, it seems that the guide lines for the policy will be issued by the Department of Industrial Policy and Promotion, which will specify that foreign companies should import and retail and would restrict them to source Indian products that could be retailed in their own brand names. Implying that they should manufacture locally and then retail.
The Indian economy has been expanding at 7 percent per year since 2001. Its $300 million middle class is earning larger pay-pockets but has limited spending choices when it comes to desired products, as its policy makers have restricted access to global supplies of high class products at reasonable import taxes.
India, like China, has been cautious and has been restricting several products such as home textiles, because it is assumed that liberal imports may harm its domestic industry. The opening of its retail markets though may not necessarily have been a voluntary act, as the western world has been insisting that it cannot deny access and restrict imports.
Gibson G. Vedamani, CEO of Retailers Association of India (RAI), which represents a number of larger, organized retailers, said, ''Basically two things will happen. Brands, which had hitherto not looked at licensing or franchising, will now consider it as an option and a larger number of joint ventures will take place. Existing retailers will willingly look to converting existing franchises and license agreements into joint ventures. Even China, in its initial stages of opening up its retail sector to FDI, saw more than 300 joint ventures being entered into."
Welspun Retail India is now making its foray into the sector and has also been the franchisee for the multinational brand, Tommy Hilfiger, in India. According to its CEO and Managing Director, Anshuman Singh, Welspun Retail India (also a leading exporter of home textiles) said, ''…..from the earlier franchising arrangements, we will now see joint ventures with equity participation. This is the path for the future and is required in any case…but is a step in the right direction.''
Meanwhile Reliance Industries (Trevira's new owner) has ear marked $850 million into retail business and according to dependable sources they may collaborate and hire specialists in the retail management from the West.
Retail in India is a new phenomenon. The country is decades behind its neighbors Thailand and Indonesia. Malls are built with indigenous know-how, with Indian made goods, which stems from western world retailing concepts such as Tescos or Wal-Mart.
For now, it seems that the guide lines for the policy will be issued by the Department of Industrial Policy and Promotion, which will specify that foreign companies should import and retail and would restrict them to source Indian products that could be retailed in their own brand names. Implying that they should manufacture locally and then retail.
The Indian economy has been expanding at 7 percent per year since 2001. Its $300 million middle class is earning larger pay-pockets but has limited spending choices when it comes to desired products, as its policy makers have restricted access to global supplies of high class products at reasonable import taxes.
India, like China, has been cautious and has been restricting several products such as home textiles, because it is assumed that liberal imports may harm its domestic industry. The opening of its retail markets though may not necessarily have been a voluntary act, as the western world has been insisting that it cannot deny access and restrict imports.