The Indian parliament has given it’s knod of approval to FDI reforms to multi-brand retail, which will allow greater participation from foreign players in India’s consumer goods market.
riven by the dual engines of economic growth and healthy demographics, the Indian consumer goods market continues to evolve rapidly, and is predicted to reach US$1.3 trillion by 2020, representing a 15-20% increase over the next five years.
Richard Heald, Chief Executive of the UK Indian Business Council (UKIBC) commented, “This creates significant opportunities for the UK retailing sector to make great strides into India. I urge UK companies to explore the Indian retail market before others move in and the window closes. Whether it is a food and drink manufacturer, a fashion and accessories brand, or a supply chain expert the growing demand from the Indian consumer shouldn’t be ignored. Brand Britain resonates in India, so we are well placed to meet the demand.”
In practice the conditionality inherent within multi-band retailing is likely to mean that entrance by large retailers will be gradual. However, the message that it sends to the international market at large is vital for sustaining constructive investment.
Nevertheless, the approved reforms now permit Indian states to allow FDI of up to 51 percent in multi-brand retail, opening the way for Tesco and other capitalist giants to open supermarkets in India, building on the less contentious decision that was taken to relax FDI in single-brand retail, which has allowed UK companies like Pavers England to own 100% of their operations in India.
The reforms also introduce new and welcome flexibility in the requirement that foreign owned single brands must source 30 percent of their products from small Indian industries. International firms looking for a waiver on this sourcing provision now have the option of establishing their own factories in India.
It is expected that the reforms, which will ultimately to be of major benefit to the Indian consumer, and the whole industries that supply them with everything from groceries to fashion. This upgrade of India’s retail infrastructure and supply chains will benefit everyone from consumers to local companies, including those in the unorganised retail sector.
The reforms will also create fresh investment in the farming and food sector, which will dramatically reduce the threat to vulnerable groups posed by rising food prices, as well as allowing for a greater choice of products for consumer goods and services. These reforms and rising incomes will encourage luxury goods companies, who have previously been hesitant about India, to invest and tap into this potential. consumers.
