The Indian government has opened the doors for foreigners in multi-brand retail, even though there was stiff opposition to it from several quarters. Still, the whole debate around its efficacy simply refuses to die down. The government is hopeful that this will bring in huge investments, create jobs, improve the country's supply chains and fetch better prices for farmers.
Stocks of listed retail companies such as Pantaloon, Shopper's Stop and Trent were up in morning trade on Tuesday on the Bombay Stock Exchange (BSE) following Foreign Investment Promotion Board (FIPB) clearance received by Swedish major IKEA for its Rs 10,500 crore (USD) investment in the country. This is the largest investment proposal in the single brand retail category so far.
At least four foreign retailers have sought permission to set up wholly owned operations in India to sell their own brands since September, when the government relaxed a sourcing rule which was seen as an impediment to investment by some companies.
IKEA will be permitted to sell non-furniture items and run cafes in India, the country's trade minister was reported as saying, removing a sticking point on the Swedish retailer's plans to enter the country.
"IKEA's proposal based on its global model, which includes cafeterias, will be approved," Commerce and Industry Minister Anand Sharma was quoted as saying by the Financial Express newspaper on Thursday.
India Ratings has maintained a negative outlook on the Indian retail sector for 2013. This is driven by continuing weakness in consumer spending due to rising inflation, marginal real wage growth and a weak macroeconomic environment.
The rating levels of India Ratings-rated retail companies have already factored in revenue declines and margin pressures; this contributes to the high proportion of Stable Outlooks.
India is poised to approve furniture retailer Ikea's application to open stores as the nation seeks to lure more investment, Commerce Minister Anand Sharma said on Wednesday. The Swedish chain has sought clarification on whether it can sell the same types of products in India as overseas, posing a test of the nation's commitment to implementing policy overhauls aimed at reviving inflows to boost a struggling economy.
If the rulebook of India's retail sector was changed in 2012, it's only in 2013 that international chains and other foreign investors will get down to action. Apart from the slowdown in international economies, another reason that could keep retail groups cautious is the general election scheduled for 2014.
Although foreign direct investment (FDI) in multi-brand retailing has been permitted – subject to final approval by state governments – many companies may want to wait and watch till the 2014 poll results are announced.
Indian retail chain majors – Reliance Fresh, Bharti Retail and Aditya Birla Retail – have incurred a total loss of nearly INR1,200 crore (INR12 billion, USD218.8 million) in 2011 financial year, Parliament was told on Wednesday.
In a written reply to the Rajya Sabha, Minister of State for Commerce and Industry S Jagathrakshakan said as per the financial statement filed by the Reliance Fresh, the company posted a net loss of INR345.82 crore during 2010-11.
India's retail inflation touched 9.90 percent in Nov, year-on-year, up from 9.75 percent in October. The uptick was driven primarily by the continued price rise of food and clothing items. Fat-rich items and sugar contributed the maximum to the price increase at 17.67 percent and 16.97 percent, respectively. Prices of vegetables, pulses and cereals grew at the rate of 14.74 percent, 14.19 percent and 12.35 percent, respectively.
Rising for the second consecutive month, retail inflation surged 9.90 percent in November driven mainly by rising prices of food items such as sugar, vegetables, edible oil and clothing.
The retail inflation was 9.75 percent in October and 9.73 percent in September.
The highest price rise in November was seen in the oil and fats segment with an annual inflation of 17.67 percent, as per the Consumer Price Index (CPI) data released on Wednesday.