One of the first foreign retail companies to explore the option of an Indian entry, UK-based Tesco has now shelved plans of entering into India unless FDI is allowed in retail sector.
Under current regulation, 51% foreign investment is allowed in single-brand retail while foreign multiple-brand retailers can also do cash-and-carry or franchise or licence operations. The government is also hardening its stand due to political opposition forcing tough times for foreign retailers.
Earlier this week, an AT Kearney study had ranked India among the top emerging retail market but foreign retailers in India face challenges in terms of legal and operational obstacles, real estate and quick understanding of nascent organised Indian retail market.
Tesco was earlier certain to partner with Bharti but due to latter’s rapid expansion policy, it backed out. Then there were talks of Tesco partnering with Tatas and Munjals. But now Tesco is concentrating on US where it feels it has a better chance of success.
The government is formulating a new policy on franchisee arrangements between the Indian companies and their foreign partners, which may affect the host of agreements already signed including the Bharti-Walmart deal and prevent entry of several foreign brands to India.