Thursday, February 16, 2012

Permit FDI in Non-Food Retail in India

An open letter - sent previously by email.

To Shri. Anand Sharma,
Commerce Minister,
Government of India.

Dear Respected Minister,

I write this to bring to your attention the stagnation and confusion the Retail industry is facing due to the highly charged political debate on the pros and cons of permitting FDI in retail.

While at an industry level, all Retail businesses are seen to be in the same space, I'm sure you are aware that the main arms of retail, i.e. Food Retail and Non-Food Retail are as different from each other as chalk and cheese. Thus, all the political opposition to FDI on the plank that it would hurt the small kirana's and also adversely affect food security and pricing should ideally be confined to Food Retail, as all the tussles for and against the issue is resulting in much collateral damage to Non-Food retailing.

I request you to kindly consider the suggestion that Non-Food Retailing should ideally be treated as a separate entity and laws governing them should be configured differently.

I am a retail professional who has seen the industry develop since 1996 in both India and abroad, and I sincerely feel that our country has much to learn from international retailers and hence creating a more conducive environment will only help us as a nation to improve the general customer experience of a shopper in India.

However, as you are facing much strident opposition to your enlightened moves, it may be prudent if you can completely separate the Food and Non-Food retail verticals and perhaps the opposition to reforms in the non-food or Lifestyle retail would be less shrill as the audience for this segment is not the poor sections of society that the opponents are trying to protect. I do hope you will not view this request unkindly and permit me to make the following submission.

I humbly request you to relook at the issue of permitting FDI in Retail from the perspective of separating Food and Non-Food Retail, and perhaps agree to recast the rules for Non-Food Retail which will help bring in the much needed churn in the retail industry in India. Most retailers in this vertical would welcome infusion of both foreign funds as well as international expertise which may help them turn the corner.

Also of particular concern is the 30% local sourcing rule, which may please be put into a time-frame of say, 5 or 10 year horizon instead of from day 1, which is very difficult for a multi-national retailer of an established brand to achieve. If they are given time to develop the local vendor base and train them, in time, the 30% requirement would not be a concern.

Further perhaps, leaving the battle of Food Retail FDI for some time in the future may be for the best. I do sincerely hope you will be able bring in the change that this country desperately needs.

Yours Sincerely,

Hemanth Sharma


  1. Perhaps an unrelated development, but the Government announced today that they will consider modifying the 30% local sourcing clause. One hopes that the change will be substantial and credible - something that will encourage fence-sitting retailers to start considering India more seriously sooner rather than later.

  2. Another happy development.
    The beleaguered Government has found a new supporter of FDI in Retail – the Reserve Bank of India. In fact, the RBI has recommended to the Government to go ahead with FDI in Multi-Brand Retail as it will reverse the slowing down of the flow of funds into the country as this is 'a Globally preferred FDI sector'.
    I do hope that politics will be forgotten and the reforms agenda be taken up for discussion at the earliest.