The various policy conditions for foreign direct investment (FDI) in multi-brand retail makes mass grocery and apparel the two most favourable segments to invest in, says Deloitte Touche Tohmatsu India Private Limited in its report titled Indian Retail Market-Opening more doors.
Closely examining the implications of the policy the report says that each of the conditions will have a different impact on the various sub-segments of the retail industry in India.
''A policy condition might have a low impact in one segment but could be a major stumbling block for another segment. Mass grocery and apparel are two of the fastest growing organized retail segments in India today. In both these segments there are large domestic retailers who could be potential joint venture partners for foreign retailers'', said Gaurav Gupta, senior director, Deloitte Touche Tohmatsu India Private Limited.
He also said, ''Foreign retailers could enter India by forming a new joint venture company, which shall have multi-brand retail stores in India. Alternatively, the foreign investor may also consider acquiring 51 per cent stake in the existing business set-up of the potential Indian joint venture partner''.
Another advantage in the segment is that existing mass grocery retailers in India already source many products directly from producers and ''small'' food processing units. To meet the policy guidelines on sourcing and to have better margins, foreign retailers would need to cultivate relationships with local manufacturers to drive strong private label brand.
Whereas, multi-brand organised retail in specialty stores such as consumer electronics, footwear, furniture and furnishing, etc, are expected to expand and mature in the next few years. However the policy condition on sourcing will continue to be a major bottleneck for FDI in many of these segments.