Why should there be opposition to foreign direct investment in multi-brand retail where domestic organised retail is already flourishing,says Rajan Bharti Mittal,vice chairman and MD of Bharti Enterprises. In an interview to The Indian Express just after the weekend when the government allowed entry of 51 per cent foreign direct investment in the sector,he makes his surprise evident.
First things first,do you think the government will be able to hold on to its decision?
I think so. Unlike in November when there was a pause announced after the Cabinet decision,this time it should go through. However we will wait for the official notification on the policy. That will be the stage for the decisions to start getting implemented. This time the government at the Centre has left it to the states to get the notification implemented in the way they want. So the states have the clear choice to implement it,the way they want.
But given the uncertain stage of the ruling coalition at the Centre will companies be willing to take the risk or will they wait out for a more certain consensus.
Every decision has its naysayers. I think those who are opposing it have not really understood it. There is no difference for instance between foreign investment in the sector and the presence of organised retail by big domestic players. Can someone explain the difference between the two formats to me. The processing,the manufacturing set up and just about every thing else is so identical. If they are there then how does the presence of a foreign investor make for such a substantial difference. India,for instance is not so very different from the structure of markets like Brazil or China for that matter.
So you dont think the present noises against the Cabinet decision are going to affect the plans of companies.
There are already several of the foreign retail groups present in India like Walmart,Tesco and Carrefour. They are present in different formats like cash and carry,wholesale and like in the case of Walmart in the back end. Its a question of moving to the front end of the business now.
How much time would you expect the retail companies to invest in before they can open their first branded stores in India?
It really varies,depending on the formats. But I would say a lead time of 12 to 15 months looks reasonable at this point of time. And I must point out that one of the major benefits of these entities is employment. A 3,000 sq feet enterprise can provide for 17 to 18 people while the larger format,say those that go beyond 40,000 sq feet or more can employ 100 to 135 on an average.
Since some of the states are not okay with FDI,how does a venture like EasyDay (brand owned by Bharti Retail) operate there? Does it stay a standalone entity in those states while it becomes a JV in say,Haryana?
We have to work these out. Broadly I can tell you we will not be comfortable changing partners anywhere. Our venture with Walmart is one of choice,and it is a 50-50 one,even though other equity levels were possible. Both of us chose that.
Similarly if there is an EasyDay-Walmart outlet in Delhi can it procure its supply from UP,a state that has objections for its outlet in Delhi.
There will be no objections there. Investment in retail sector in back-end is allowed up to 100 per cent so I am sure there will be no problem in procurement at all.