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FDI in India

Government rolling out the red carpet for foreign retailers in Davos

By RJ Whitehead , 24-Jan-2013

Hot on the heels of helping to approve Ikea’s request to set up shop—or rather 20 stores—in India, an Indian minister has been working equally hard to woo Tesco ahead of a possible entry into the market.

Earlier this week, Anand Sharma, the commerce and industry secretary, sent Ikea’s Rs10,000 crore proposal to the Foreign Investment Promotion Board (FIPB) for clearance. It will next go before the Cabinet Committee on Economic Affairs to be rubber stamped. 

More recently, the minister has been seen meeting with Sir Richard Broadbent, Tesco’s chairman, in Davos to assure the latter that the government will pull out all stops to make sure the British grocery major is made very welcome.

Paving the way

The minister has also been telling potential investors that the controversy over foreign direct investment (FDI) limits and local acquisitions has already become a thing of the past after the government announced steps to address the concerns.

Tesco had sought clarification from India on a number of conditions in the new foreign direct investment policy for retail, and now government has committed to provide all assistance for Tesco to set up operations in India at Sharma’s behest.

Indeed, according to an official release, the government has pledge to provide all the necessary hand-holding for foreign companies to enter India’s heavily anticipated retail market.

The Minister has offered all help if Tesco decides to send a team to the Department for Industrial Policy and Promotion for consultation,” said the release.

The British retailer, which mainly sells groceries including processed food, set up an Indian subsidiary to buy fresh and processed foods from the country for its global stores last year. It now wants to set up retail outlets in the country.

A number of conditions imposed on foreign investors, including regulations governing minimum domestic sourcing and product lines that are allowed to be offered for sale, have been met by some confusion by investors.

Ikea blueprint

However, one government official told The Hindu’s Business Line that he believes that the commerce ministry’s dealings with Ikea has paved the way for a smooth process. 

The clearance given by the FIPB to Swedish furniture retailer Ikea to set up its stores in the country has given a positive signal to other retailers that we are serious about opening up the sector,” he said.

In a meeting with Paul S Walsh, Chief Executive of Diageo, Sharma was briefed about the company’s plans in India. Walsh termed India as a “fantastic market” and said that the company’s experience there has been “great”. 

He also informed the minister that his country was exploring the opportunities of marketing Indian spirits overseas.

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