Union Commerce and Industry Minister Anand Sharma on Tuesday strongly hinted that the government was seriously considering raising the 51 per cent foreign direct investment (DI) limit in single brand retail business to a much higher level.
Speaking at a CII organised event on Indian Luxury Market in New Delhi, Mr. Sharma said the government was seriously considering to raise the bar further to allow increased FDI. At present, the government allows 51 per cent FDI in single brand retail businesses run by global chains like Adidas, Nike, Louis Vuitton, Hermes and Gucci. However, he did not elaborate on how much higher it was being planned to be raised. “How much it is, only when we take the decision you will get to know,’’ he remarked.
Mr. Sharma said he would ask the Finance Ministry to lower tariff barriers as well. “It is the domain of the Finance Ministry. I will be meeting some of the officials today and we will see what we can do,’’ he added.
India-EU free trade
Referring to the India-EU free trade agreement (FTA), Mr. Sharma said the chief negotiators are currently engaged in talks. “This has taken us long. I have spoken to EU Trade Commissioner. We must bring it down to a closure. Once the FTA is signed, it will open a pathway for greater cooperation among the nations,’’ he stated.
India is in talks with the EU, its biggest trading partner, since June 2007 for liberalising trade in goods, services and investment through a Broad-based Trade and Investment Agreement (BTIA). Already 13 rounds of talks have taken place without any tangible result.
Dismissing credit rating agency Crisil's lowering India’s GDP forecast to 7.6 per cent for 2011-12, he said: “India will definitely have 8 per cent growth because of its consumption patterns and higher saving rates." Crisil has scaled down the growth projections for India in view of the deteriorating global economic scenario and "grim investment climate in India on account of the policy environment,’’ he said.
Firms welcome move
Meanwhile, the luxury brand firms are upbeat about government’s move to hike the FDI limit. U.K. luxury brand Jimmy Choo's CEO, Joshua Schulman, said: ``We are very enthusiastic about India and will increase our investments here as soon as the environment is right to do so.’’
He, however, said that even if India were to allow 100 per cent FDI, the brand will not operate on its own here. At present, India allows only 51 per cent FDI in single brand retail, none in multi-brand and 100 per cent in the cash-and-carry trade.
Fondazione Altagamma, a body of luxury brands of Italy said increasing the FDI limit is not enough to attract overseas investors in India’s retail sector. “Right now, the environment is not conducive. The government should not only relax FDI limits, but also bring down customs duty and countervailing duty on luxury goods. Only then a lot of European and Italian brands will enter India in a big way,’’ Fondazione Altagamma Executive Director, Armando Branchini said.
He said India is lagging behind China in a big way when it comes to the presence of Italian brands. “Around 40 Italian brands have 430 stores in China, but in India, only 15 brands are present with just 30 stores,’’ he said.
Indian designer wear retailer Kimaya Fashions chairman, Pradeep Hirani said while further opening up of FDI in single brand retail will open the floodgates for international brands, for real growth of the sector, even customs duties will have to be reduced on luxury goods.