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Wednesday, February 17, 2010

Retail wants industry status, hike in FDI limit in Budget

Barely recovering from the slump in the economy, organised retailers in the country today said the sector should be given industry status, besides easing foreign investment norms in the forthcoming Budget.

"Industry status has been a long standing demand of the retail sector. Besides we also want a relaxation in the foreign direct investment (FDI) norms," Retailers Association of India Chief Executive Officer Kumar Rajagopalan told PTI.

Sharing similar views, Koutons Retail India Chairman D P S Kohli said: "Industry status has been a recurring demand of the retail sector for many years since only then will the retailers be able to fully enjoy the benefits of organised financing, insurance and fiscal incentives."

According to industry figures, only around five per cent of the estimated over $450 billion Indian retail sector is currently organised.

Calling for easing of FDI norms, Rajagopalan said, "No industry in India has grown without FDI participation and for retail to emerge as a big player, more FDI should be allowed."

Besides, he said even if FDI norms are not relaxed in the Budget, the government must give a clarification on FII and foreign PE funding route as there is a lot of ambiguity.

Kohli said a clarity on the issue will help Indian retailers raise funds from abroad as the global liquidity condition is showing improvement.

At present, the government allows 51 per cent FDI in single brand retailing and prohibits any foreign investments in the multi-brand segment.

Delhi-based Vishal Retail's Chief Executive Officer Ram Chandra Agarwal said, "Easing of FDI norms will bring much needed funding which is very important for the sector at this time. Besides, it will also bring along more competition."

He also said the government should rationalise the tax structure and eliminate multiple layers of taxation, adding such measures will help in making the sector more organised.

Franchise India Chairman Gaurav Marya said the government should make a special budgetary allocation to franchising businesses in its small and medium enterprises (SME) from the finance allocated to the financial institutions.

"There are 3.5 crore small and medium business units in India of which retail sector constitutes 1.8 crore units. Credit is a major hurdle in growth of franchising," he said.

Supporting the stand of the retail sector players, global consultancy firm Ernst & Young (E&Y) said that funding is the biggest aspect for successful growth of the segment.

"Allow more FDI and grant it industry status. Both the steps will help retail to access capital and become competitive and will ultimately help the consumers by giving them more choices," E&Y Partner and Industry Leader (Retail and Consumer product Practice) Pinaki Ranjan Mishra said.

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