Up in arms against retail FDI

Major retailers at the CII Retail Summit 2005 today spoke in one voice against foreign direct investment (FDI) in retail industry.

Sanjiv Goenka, vice chairman, RPG Enterprises said, India was not ready for FDI in retail. He cited the example of developed nations where FDI was allowed after a the retail industry was established over a long period of time.

In India, retail was only 2-3 years old.

Goenka said, infrastructure, supply side or people were not ready for FDI and he was strongly opposed to the concept at this juncture.

He pointed out that the move would swamp the 'kiranawallahs' while boosting the property developers which appeared to be the stronger lobby.

RPG had lined up major investments in the retail space and would invest around Rs 300 crore by 2005.

Kishore Biyani, managing director, Pantaloon Retail (India) said, retail was the last leg of any economic activity. "What's the hurry"he said. He also questioned that if FDI was introduced at this point, then India would be giving away cheap valuations.

"Why do we need FDI in retail?"said Biyani, adding retail was the most important part of the entire value chain and allowing foreigners in this area would have to be thought out carefully.

Kurush Grant, chairman, service sector sub committee, CII (ER) said, India currently had a highly fragmented retail sector with an organised retail penetration rate of only 2.5 per cent.

However, organised retailing has been growing at about 25 per cent over the last two years and the rate of penetration is expected to accelerate eight per cent over the next five years.

The main driver for growth were increasing urbanisation and rising incomes among the youth, supply of good quality land was no longer a constraint, profitable models had emerged across most product categories.

Grant pointed out that the regulatory environment was becoming more favourable and capex plans of retailers were also becoming more aggressive.