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September 28, 2011

WRC 2011: Aditya Birla CEO expects India to ease rules on FDI

The CEO of India's Aditya Birla Retail expects the company's rules on foreign direct investment in the country's retail sector to be eased in the coming months.

The CEO of India’s Aditya Birla Retail expects the company’s rules on foreign direct investment in the country’s retail sector to be eased in the coming months.

India allows overseas retailers to own wholesale cash-and-carry chains outright and up to 51% of single-brand outlets such as Nike outlets. However, in a bid to protect local shop owners in India, foreign retailers cannot own multi-brand stores.

In May, however, an Indian government panel recommended easing the rules on foreign investment.

Speaking to just-food sister site just-style yesterday (27 September), Aditya Birla Retail CEO Thomas Varghese said the Indian government was discussing allowing overseas retailers to own 51% of multi-brand outlets, which he described as “very progressive”. The government, he noted, had been talking about a maximum stake of 49% “for a long time”.

Varghese said India was also proposing that half of that 51% be invested in back-end operations, which has been defined as “anything that is not the store”.

According to Varghese, who is also chairman of the Confederation of Indian Industry’s National Committee of Retail, the Indian government has dropped conditions around sale to small traders, and is talking about opening up to cities with more than one million people, of which he said there are more than 35 in the country.

“The subcommittee has already sent up a note to the cabinet, and it’s now lying with the cabinet. And it’s now a political decision that has to be made,” he said.

He said that the decision is likely to be cleared after a number of false starts and much speculation in recent years.

“The good thing about it this time, is that there has been a debate, and it has been a public debate. It has been debated in the media to death. And if there is any opposition, and there is [still] opposition from one political party because their followers are from the trading community, that opposition has died down.”

While the sector may be set to open up in the coming months, Varghese said he does not expect a deluge of retailers to come storming into the country.

“There are a lot of challenges, and I think that one has to be very practical. I would say that people may be very careful, and I would advise them that they should be.”

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