UK-based retail chain Tesco is the only firm that might be impacted by the Maharashtra and Haryana Assembly election results announced on Sunday.
Tesco, which has an equal partnership with the Tata group's Trent, is the only foreign multi-brand retailer to have made a proposal to operate stores in India. The UK chain's focus markets are Maharashtra and Karnataka. Both Maharashtra and Haryana, where the Bharatiya Janata Party (BJP) will replace the Congress governments, are industry hubs and attractive destinations for the retail sector. Most prominent domestic retailers, including the Future Group and Reliance, have significant presence in these states. While the merchandise retail consumption of the top 15 cities of India is about $114 billion (Rs 6.8 lakh crore), that in Greater Mumbai and national capital region clusters alone account for about $42 billion (Rs 2.5 lakh crore), according to a recent study by Technopak Advisors, a retail consultancy.
The Tesco-Trent venture, which runs 12 stores across Maharashtra and Karnataka, is believed to have aggressive expansion plans in these states. But now with the change in the government in Maharashtra, there might be a rethink, industry sources said.
| EXPANSION MODE |
|
However, a Tesco spokesperson said, "We do not comment on speculation.''
Arvind Singhal, chairman, Technopak Advisors, said, "There's no direct impact of these election results on the retail industry.'' Tesco is an aberration in the current scenario where no other foreign multi-brand chain has chosen to operate in India, according to Singhal. He argued that with the stable government at the Centre and its pro-reforms agenda, there's likely to be a positive indirect impact on the retail sector as extra money comes into the hands of the consumer.
In a surprise move, Tesco opted a few months ago to enter the Indian market in multi-brand retail, a sector which was opened to 51 per cent foreign direct investment (FDI) by the previous UPA government in 2012. It chose to operate in Maharashtra and Karnataka, both Congress-ruled at that point.
The FDI rule came with a condition that every state will be free to allow or bar foreign investors in the sector. The BJP is opposed to FDI in multi-brand retail, but has not yet overturned the UPA policy. But every BJP-ruled state has told the Centre that it will not allow foreign investors in retail, fearing job loss to thousands of kirana (neighbourhood) shop-owners. Even as the NDA government has said earlier that approved applications will not be revoked, Tesco's expansion in Maharashtra will perhaps be a test case that the industry will watch, in relation to state approvals.
Among the other foreign chains that have been present in India, French group Carrefour, which remained in the cash-and-carry category, which allowed 100 per cent FDI, recently exited the market. American group Walmart runs 20 such stores in India, along with e-commerce service in the same category. Although Walmart was expected to be the first to apply for multi-brand, it has stayed away so far due to what industry thinks is an "unfriendly'' policy.
