Government unlikely to relax FDI norms for the retail sector

July 2, 2009 · Author: · Category: retail 

India’s organized retail sector has been facing tough times because of the ongoing economic slowdown and resulting job losses and salary cuts that have had downsizing impact on spending power of consumers. As a result, the foot-falls and the average revenue per sq. feet for the retailers have been strongly impacted. Lack of financing is another issue that has hit the industry hard in recent times.

In this backdrop, the industry wants the government to take a series of initiatives in the forthcoming Union Budget to help it beat the slowdown. On top the agenda is the industry’s demand to allow foreign direct investment (FDI) in the multi-brand retail. While the government allows FDI in single-brand retail, the same is not allowed in multi-brand segment.

The retailers also want the government to extend industry status to retail business contending that it was a very big sector and a major employer. Another demand of the sector is that the government should take measures that would result in increase in consumption.

However, most of the demands of the industry, especially the one relating to FDI, are not likely to be met, at least in the current fiscal. While the government is interested in the long run development of organised retail, it wants to ensure that the development does not harm the smaller players in the segment.

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