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Inflation,low growth to be a drag on retail sector: Report

'Opening up multi-brand retail sector unlikely to generate interest'

Written by Express News Service | New Delhi | Published: July 13, 2013 1:09:37 am

High inflation and low growth in wages will continue to put pressure on the Indian retail sector during the second half of the calendar year,according to a report.

Maintaining a negative outlook for the retail sector,India Ratings & Research in its report on the sector,says that while retailers will work towards streamlining their operations to reduce costs,high discounts will drive down margins of retail companies and retailers will go for controlled expansion during 2013-14.

Moreover,the opening of the multi-brand retail sector to foreign investors is unlikely to generate any interest among global retailers given the existing hurdles in the policy.

“India Ratings & Research expects estimated lower operating profitability,higher funding costs and working-capital requirements to continue to exert pressure on operating cash flows. While some players may resort to asset sales to reduce absolute debt levels,the commensurate reduction in cash flows from these assets,may provide limited,if any,benefit to credit profile,” the report said.

Even though foreign investments up to 51 per cent were opened in September last year,no foreign retailer has sent application for approval. Companies including Tesco and Carrefour,have sought clarity on the policy.

The DIPP brought out with certain clarifications regarding back-end infrastructure,but global retailers are still unclear about sourcing norms and discretionary powers to states among other issues.

New Delhi: Walmart executives met finance minister P Chidambaram in the US on Thursday and are believed to have discussed their concerns regarding the foreign direct investment (FDI) policy regime in India.

The meeting of Walmart representatives assumes significance given the fact that not only is it keen to invest in the multi-brand retail sector but it has also been probed for allegedly bribing and lobbying in India for greater access. A committee’s report on the probe is being examined by the government. The US retailer is also being probed by ED for alleged forex norms violation.

Commerce and industry minister Anand Sharma,who is in the US,also met Scott Price,president and CEO of Walmart Asia on the issues relating to retail FDI.

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