FDI in retail: Big retailers barring Walmart, Tesco adopt a wait-and-watch attitude to govts decision to allow FDI in supermarkets sector
The government may have spread the red carpet out for overseas retailers last week, but the political heat its reforms burst has generated means that footfalls on this carpet will be few for now. And those who plan to tread it will only do so gingerly.
After last November's experience when the government was forced to freeze its decision to allow foreign firms into the retail sector, global retailers are choosing to adopt a "wait and watch" attitude to decision permitting foreign retailers to invest in India's supermarkets sector.
At the global retail industry's annual schmoozefest -- World Retail Congress - taking place in London, the Indian participation is strong, but the outside interest in the country is, as Arvind Singhal of Technopak put it, good but not good enough.
As one London-based private equity and real estate consultant says: "All my clients ask about India. But they don't seem quite ready to put their money in it."
Speaking on the sidelines of the Congress, Lucy Neville Rolfe, board member of Tesco, Britain's biggest retailer, was clear: "We're glad about the progress that has been made in India... But there are conditions. We have to study the impact of the conditions."
The consensus response to the reforms: given what happened last year, investors want to be assured this time the decision will stick. As the international business director of a major European food retailer said: "The fact that reforms were withdrawn last year, Parliament sessions are aborted regularly, no policy gets through, constant changes in policy...It does not make for confidence for a global manager."
Not everyone is aware of the intricacies of policy-making in India, and the big question being asked is: will this have to go through parliament? It does not, but the fear is that in that case, it's a non-starter.
Pankaj Ghemawat, management guru and a professor at IESE business school in Barcelona, is of the view that companies like Walmart, which changed its global model to partner with Bharti in India, is better placed to take advantage of the changes than anyone doing a cold start.