Roadshows to push the FDI Cart in Food Retailing

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The government is planning road shows abroad to showcase India’s food retail sector, having failed to drum up much foreign direct investment after unveiling a landmark policy two months ago.
In the face of criticism that the rules are too restrictive, officials consulted executives of Walmart, Nestle, Heinz, Thailand’s CP Foods and others to seek views on the matter and ask about investment plans. The executives suggested allowing non-food daily items in such stores may be a good idea.
In June, the government allowed 100 per cent FDI in retailing of locally sourced and packaged food products to encourage investments in both brick-and mortar and ecommerce besides giving farmers a boost.
The government is said to have dropped plans to include some general merchandise such as soaps and shampoos in the policy, which is the main point of complaint against it — that food alone doesn’t make it worthwhile for retailers.
The Friday meeting with overseas companies was called by food processing secretary Avinash K Srivastava, said several people who attended and didn’t want to be named. “They asked about the reaction from India and outside on the new policy,” said one of them.
Spokespersons of companies cited above didn’t respond to specific queries about the meeting. Heinz couldn’t be reached.
Some attendees said officials were keen on seeking out possible investment commitments. “There seems to be some urgency on part of the government,” said one person.
Retailers like Walmart were asked whether they planned such stores as were manufacturers like Nestle and Heinz. “They were taking feedback from everyone and Nestle and Heinz said they are into manufacturing and not in retail,” the person said. Officials gave a detailed presentation on the road shows that are being planned.
Rather than road shows, the government needs to get the policy right, said an expert. “People are ready to invest but the government has to make it conducive for them,” said K Radhakrishnan, a member of the retail committee of the Federation of Indian Chambers of Commerce and Industry (FICCI).
“If you say an FDI company cannot sell even one non-food item, it is never possible to complete a consumer’s basket. It doesn’t make sense.”
Nestle declined to comment on the meeting. “We have been in India for 104 years and currently have eight manufacturing facilities with about 7,000 employees working across locations and branches,” a Nestle spokesperson said. “In the last few years, we have made significant investments in adding capacities in almost all our factories. The products sold in India are primarily manufactured locally with only a very small fraction of sale consists of imported products. We cater to the domestic market thro-Roadshows to Push the FDI Cart in Food Retail Some say officials are keen on seeking out possible investment commitments ugh distributors.”
The policy had been touted as a game changer in retailing that was expected to create jobs and infrastructure besides benefiting millions of farmers.
At the meeting, representatives from one of the world’s biggest retailers said pure-play food doesn’t exist anywhere as a model. “They have non-food as well to make them viable,” said one person. Non-food component should be 10-15 per cent as food is normally low-margin business and retailers need general merchandise for shops to make business sense, some executives said.
India has been trying to lift overseas investment in retail as it regards it as a big generator of jobs but has faced resistance from those who worry an influx of foreign retailers may kill off neighbourhood stores.
In 2012, the previous government allowed 51 per cent FDI in multibrand retail but that was a flop because of conditions such as an investment cap in backend infrastructure and states able to decide whether they want to let foreign companies in. Walmart has welcomed the policy announced in June.
“As we have said earlier, the decision to allow 100 per cent FDI under government approval route, including through ecommerce in trading of food products manufactured and/or produced in India is very progressive and far reaching,” said Krish Iyer, CEO of Walmart India “This step will help in reducing wastage, helping farm diversification and encourage industry to produce locally within the country.
It will benefit farmers, give impetus to food processing industry and create vast employment opportunities in the country. We are evaluating the model as per guidelines announced.”
Food is the biggest component of India’s $600 billion annual retail market. According to government estimates, India’s food retail market is expected to swell to Rs 61 lakh crore by 2020 from Rs 25 lakh crore now. However, it’s politically sensitive. Opponents of FDI say the entry of multinational corporations into food retailing will drive millions of mom-and-pop stores out of business.
IndianBureaucracy.com wishes the very best.

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