Allowing 100% foreign direct investment (FDI) in single-brand retail will get more global brands to enter India and help the existing ones to expand faster but the move cannot be used as a substitute to relaxing multi-brand retail to FDI, according to industry players.
Reacting to reports of the government's consideration to increase FDI in single-brand retail to 100%, the players said luxury segment would be a clear beneficiary of such a move.
"If FDI in single-brand retail is increased to 100% in the country, a lot of global retailers of lifestyle goods and apparel would definitely come to India. However, it [relaxing FDI limits for single-brand retail] is not a substitute for opening the multi-brand retail sector to FDI," Retailers Association of India CEO Kumar Rajagopalan said.
He said the need for FDI in multi-brand retail was more crucial as it would have a lot of impact on inflation, supply chain, infrastructure, which cannot be achieved by single- brand retail.
"There was no specific demand or ask from the retail companies in India for further opening single brand retail to FDI," he added.
Blues Clothing Company Executive Director Abhay Gupta said: "Allowing 100% FDI would expedite the growth of the retail market and luxury segment would be a clear beneficiary...There [is] always a mismatch between a brand's vision for expansion in India and execution by a local partner."
Expressing similar views, CEO of a leading retail chain said on the condition of anonymity that more funds would be available for expansion with such a move.
"Right now the level of investment by global players is linked with the arrangement they have with a local partner," he added.
At present, India does not allow FDI in multi-brand retail. In the wholesale business, 100% FDI is allowed, whereas in single brand retail, 51% overseas investment is permitted.
While a committee of secretaries has given a green signal to FDI in multi-brand retail, the move requires political approval. The government is still in the process of finding a political consensus on the issue. Reports have emerged that government is now considering allowing 100% FDI in single-brand retail.
In case of 100% FDI in single brand retail, numerous new models could be worked out between the local partner and a global player in case of existing partnerships in case of any change in FDI rules, Gupta of BCC said.
Blues Clothing Company (BCC) currently is the exclusive franchisee for a host of other luxury brands, including Italy's leading names -- Versace Collection, Corneliani, Cadini, VJC and Gianni Versace.
